Fully Diluted Valuation (FDV) Meaning

Fully Diluted Valuation (FDV) is a metric that represents the total market value of a project if all of its tokens were in circulation at the current market price. It is calculated by multiplying the current price per token by the "Max Supply" (the total number of tokens that will ever exist). While the "Circulating Market Cap" only counts the tokens currently tradable, FDV offers a look at the project's long-term valuation once all "vesting" and "unlock" schedules are complete.FDV is a critical tool for identifying potential "supply overhang." If a project has a Circulating Market Cap of $100 million but an FDV of $2 billion, only 5% of the total tokens are currently on the market.

The remaining 95% are held by the team, early investors, or the treasury and will be released over time. As these tokens are "unlocked," they increase the supply; unless demand increases at the same rate, this "dilution" usually puts significant downward pressure on the token's price.The "Market Cap / FDV" ratio is often used by investors to gauge how much inflation they should expect. A ratio close to 1 indicates that most tokens are already circulating, meaning there are few "surprises" left for holders.

A low ratio suggests that the project is in its early stages and that current holders will face massive dilution in the future. This is particularly common in "low-float, high-FDV" tokens, where artificial scarcity is used to drive up the initial price.However, a high FDV is not always a reason to avoid a project.

If the project has a clear utility, a large user base, and a "burn" mechanism that reduces supply over time, it may justify its long-term valuation. The key for analysts is to look at the "Tokenomics"-the specific schedule of when and to whom the remaining tokens will be distributed.

If the unlocks are spread over ten years, the impact is much lower than if they occur all at once.Ultimately, FDV forces investors to ask: "Is this project worth its eventual price?" By looking past the current hype and considering the total supply, FDV provides a more honest assessment of a project's size relative to its competitors. It encourages a move away from "unit bias" (thinking a token is cheap just because its price is low) and toward a fundamental understanding of how supply and demand will evolve over the project's entire lifecycle.