Fully Diluted Valuation (FDV) is a key metric in the cryptocurrency space, estimating the total value of a crypto project if all its tokens were in circulation. By considering the maximum potential supply of tokens, FDV provides a broader view of a project's market value.
Why FDV Matters
FDV helps investors gauge the long-term potential of a cryptocurrency. Unlike market capitalization, which only reflects the value of circulating tokens, FDV takes into account the total supply. This makes it an essential tool for evaluating the scalability and growth of a crypto project. For example, if a large portion of tokens is yet to be released, FDV can highlight potential risks or rewards tied to future supply changes.
How FDV Differs From Market Cap
While market capitalization focuses on the current supply of tokens in circulation, FDV looks at the full potential supply. Here's a simple comparison: * Market Cap = Current Price × Circulating Supply * FDV = Current Price × Total Supply Market capitalization is one of the most commonly used metrics to assess the value of a cryptocurrency. It is calculated by multiplying the current price of a token by the number of tokens currently in circulation. This gives an estimate of the project's present value based on actively traded tokens but does not account for future token releases that could affect supply and price.
Risks of Ignoring FDV
Overlooking FDV can lead to poor investment decisions. A project with a low market cap but a high FDV might seem undervalued at first glance. However, if a significant number of tokens are yet to be unlocked, the influx could lead to price drops. Investors should always consider FDV alongside other factors like adoption, utility, and token distribution.
Staying informed about metrics like FDV helps you make better decisions in the ever-dynamic cryptocurrency market. Whether you're an experienced trader or a beginner, taking a closer look at FDV can provide a clearer picture of a project's potential.
