Fully Diluted Valuation (FDV) is a key metric in the cryptocurrency space, providing insight into the market value if all project tokens were in circulation.
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.
How FDV Differs From Market Cap
Market capitalization focuses on the current supply of tokens in circulation: - Market Cap = Current Price × Circulating Supply
FDV looks at the full potential supply: - FDV = Current Price × Total Supply
Thus, FDV provides a broader view of the market dynamics and potential future token supply changes.
Benefits and Risks of FDV for Investors
FDV provides insights into the long-term prospects of a token. A high FDV but limited utility could indicate overvaluation, while a low FDV with strong fundamentals might indicate growth potential. Ignoring FDV could lead to poor investment decisions, especially if many tokens are yet to be unlocked, affecting the price.
Considering FDV in crypto project evaluations allows investors to make more informed decisions by assessing the complete token supply and its potential impact on future pricing.
