Fully Diluted Valuation (FDV) is a crucial metric in the cryptocurrency space, estimating the total worth of a project if all its tokens were in circulation, aiding investors in evaluating a cryptocurrency’s long-term potential.
Why FDV Matters
FDV helps investors gauge the long-term potential of a cryptocurrency by considering the maximum potential 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 Does FDV Differ From Market Cap?
While market capitalization focuses on the current supply of tokens in circulation, FDV looks at the full potential supply. Example calculation: Market Cap = Current Price × Circulating Supply; FDV = Current Price × Total Supply.
How Can Token Supply Affect FDV?
Changes in token supply directly impact FDV. If additional tokens are released into circulation, the FDV increases, which could dilute the value of existing tokens. Monitoring tokenomics, such as vesting schedules, staking rewards, or token burns, is crucial as they can influence both FDV and market cap.
Staying informed about metrics like FDV helps make better decisions in the ever-dynamic cryptocurrency market. Whether one is an experienced trader or a beginner, closely examining FDV can shed light on a project’s potential.
