Recently, I saw someone in the community asking what FDV actually is. In fact, this concept is quite important for crypto investing and is worth understanding thoroughly.

Simply put, fully diluted valuation (FDV) is the estimated value of a project assuming all tokens are in circulation. This number includes tokens already on the market as well as those not yet issued, locked, or reserved for future use. Market capitalization, on the other hand, only considers the tokens currently tradable. They sound similar, but there’s a significant difference.

Why pay attention to this metric? Because many projects release tokens in phases. Bitcoin incentivizes miners through mining rewards, XRP has an allocation plan, and Tezos involves stakers through staking rewards. The number of tokens in circulation is just the tip of the iceberg; the real pressure comes from the tokens that haven’t been released yet. If a project’s FDV is far higher than its market cap, it indicates that a large number of new tokens will enter the market in the future, which could dilute the value of your holdings.

For example, suppose a token XYZ has a total supply of 1 billion tokens, with only 500 million currently trading at $0.50. Its market cap would be $250 million (500 million × $0.50), but its FDV would be $500 million (1 billion × $0.50). It seems like the market cap is lower and the token is cheaper, but you need to be aware of the risks involved.

The calculation method is straightforward: Fully Diluted Valuation = Total Supply × Current Price. Circulating Market Cap = Circulating Supply × Current Price. That’s it.

Let’s look at some common scenarios. Low market cap with high FDV indicates the project is cheap now but faces significant future pressure—this could be a hidden opportunity or a trap. High market cap with low FDV suggests that few new tokens will be released in the future, and the project might already be fully priced in. If both are high, it usually indicates a mature, steadily growing project.

Take Bitcoin as an example. Recent data shows a market cap of about $1.384 trillion, with an FDV of approximately $1.382 trillion—these numbers are very close. This is because Bitcoin’s maximum supply is capped at 21 million, which is well established and unlikely to change. In contrast, some new projects have much larger differences between FDV and market cap.

However, a word of caution: while FDV is useful, it shouldn’t be relied on alone. First, it assumes token prices stay constant, but in reality, if a large number of tokens are released, prices are likely to drop. Second, FDV doesn’t account for the actual token release schedule—some projects may not unlock those tokens for five years. Additionally, factors like market competition, regulatory changes, and project development progress all influence actual value, and FDV doesn’t incorporate these.

Therefore, when investing, FDV is just a reference point. You should also consider market cap, token unlock schedules, and project fundamentals. Don’t be fooled by low market cap or scared by high FDV; the key is understanding what these numbers imply. Recently, I’ve seen many projects on Gate with detailed supply and unlock information—by comparing these, you can identify truly worthwhile opportunities.