Fully Diluted Valuation (FDV) in cryptocurrency estimates a project's total value if all its tokens were in circulation. It provides a broader view of the 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 considers the total supply of tokens. 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
For instance, the current price of SUI is $2.18 with circulating and total supply at 3.16B and 10B tokens respectively. This sets the market cap for SUI at $6.93B and the FDV at $21.87B. If a large number of tokens are locked or reserved, the FDV might be significantly higher than the market cap. This distinction is vital in assessing a project's future value and token release schedule.
Benefits of FDV for Investors
FDV provides insights into a token's long-term prospects. It allows investors to assess whether a project is overvalued or undervalued relative to its total supply. For example, if a project has a high FDV but limited utility or adoption, it may signal overvaluation. Conversely, a low FDV with strong fundamentals could imply growth potential. Changes in token supply directly impact FDV. If additional tokens enter circulation, the FDV increases, possibly diluting existing token value. Overlooking FDV can lead to poor investment choices. A project with low market cap but high FDV might seem undervalued initially, but unlocking significant token numbers could drive prices down.
Being informed about metrics like FDV aids in making better decisions in the ever-dynamic cryptocurrency market. Whether you're a seasoned trader or a beginner, reviewing FDV closely can offer a clearer picture of a project's potential.
