Fully Diluted Valuation (FDV) is a pivotal metric in the cryptocurrency space, offering insights into the potential value of a project by considering if all its tokens were circulated.
What is Fully Diluted Valuation (FDV)?
FDV estimates the total value of a crypto project by assuming all tokens are in circulation. It provides a broader view of a project's market value by accounting for the maximum potential supply, which is crucial for long-term assessments as it considers future token supply changes.
Advantages of Using FDV
FDV aids investors in evaluating the long-term potential of a cryptocurrency, considering complete supply. This makes it essential for assessing a project's scalability and growth. For instance, if a large portion of tokens is unreleased, FDV can highlight potential risks or benefits tied to future supply adjustments.
Risks of Ignoring FDV
Ignoring FDV can lead to poor investment decisions. A project with a low market cap but high FDV might seem undervalued, but the release of numerous tokens could decrease prices. Investors should always consider FDV alongside factors like adoption, utility, and token distribution.
Fully Diluted Valuation (FDV) provides investors with a clearer picture of a project's potential. It enables more accurate future assessments and helps minimize risks associated with token supply changes.
