What is FDV in crypto?
It shows what a token could be worth if all its coins enter circulation
The crypto market is full of opportunities, but not every digital asset is worth the risk. Understanding key metrics like fully diluted valuation (FDV) can help investors look beyond the hype and make smarter decisions.
Fully diluted valuation (FDV)
In the crypto world, FDV estimates a cryptocurrency’s total market value if all of its tokens were circulating. It takes into account even the ones that have not yet been released into the market. With this, FDV offers a broader picture on an asset’s total value.
It is very easy to calculate FDV. Simply multiply the token price with its total supply.
FDV vs. market cap
You may have seen both FDV and market cap listed on data aggregators like CoinGecko or CoinMarketCap. Though these two may seem similar, they measure different things.
Market cap (short for market capitalization) reflects an asset’s current value. It is calculated by multiplying an asset’s circulating supply (the number of tokens currently available in the market) by its price. Since prices and circulating supply change over time, market cap is always fluctuating. If a token’s price goes up, its market cap rises too.
FDV, on the other hand, looks at the asset’s total supply—including tokens that are not yet in circulation. This gives an idea of what the asset could be worth in the future if all tokens were released.
In some cases, FDV and market cap are equal. This happens when an asset’s total supply is already in circulation.
Why is FDV important?
FDV helps investors understand an asset’s potential future value and price. For instance, a project with low market cap and low FDV may have limited growth potential, suggesting that it is either new or struggling. On the other hand, a cryptocurrency with high market cap and high FDV often indicates that it is strong and well-established.
However, a high FDV may also suggest future price dilution, which means that its value could decrease as more tokens enter circulation. When a token’s circulating supply goes up but demand does not rise, its price could decline because of dilution. This still follows the law of supply and demand.
Take a balanced investing approach
While FDV is a valuable metric, it should not be the only factor in investment decisions. Smart investing requires looking beyond a single indicator. By looking into FDV alongside other key metrics, investors can make smarter, more strategic decisions and stay ahead in the fast-moving world of crypto.
