If you’re serious about crypto investing, there are two numbers you must understand: Market Cap and FDV (Fully Diluted Valuation). Many beginners confuse them, but knowing the difference can save you from big losses.
What is Market Cap?
Market Cap, or market capitalization, is the total value of all circulating tokens. It represents the current size of a project in the market.
You calculate it by multiplying the current token price by the circulating supply: the tokens actually available for trading.
Example: If a token costs $2 and 10 million tokens are circulating, the market cap is 2 × 10,000,000 = $20 million.
Why it matters: Market Cap gives a realistic snapshot of how much money is currently invested in a project. It helps you compare the size of different projects and understand what’s happening in the market right now.
What is FDV (Fully Diluted Valuation)?
FDV estimates the maximum potential value of a crypto project if all tokens were in circulation, including those that are locked, reserved, or vested.
You calculate FDV by multiplying the current price by the total supply: all tokens that will ever exist.
Example: If a token costs $2 and the total supply is 50 million, FDV = 2 × 50,000,000 = $100 million.
Why it matters: FDV shows the risk of future dilution. If a lot of tokens are locked and later released, the price could drop significantly.
How Market Cap and FDV Differ
The key difference is simple:
- •Market Cap = Value of tokens currently trading (what exists now)
- •FDV = Value if all tokens were circulating (what could exist in the future)
FDV is almost always higher than Market Cap, sometimes several times higher. The bigger the gap, the higher the risk of a price drop when locked tokens are released.
Example:
- •Circulating supply: 10M tokens
- •Total supply: 50M tokens
- •Price: $2
- •Market Cap = $20M
- •FDV = $100M
In this case, if all tokens were released at the current price, the market could be diluted 5×, which could significantly impact the price.
Why This Matters for Investors
- Don’t chase hype: High FDV alone doesn’t mean a project is big or safe.
- VC backing ≠ guaranteed success: Even projects backed by big investors can fail if tokenomics are poor.
- Check token release schedules: Sudden unlocks can crash prices.
- Plan for risk: Always have an exit plan and know your worst-case scenario.
Key Takeaways
- •Market Cap shows current value; FDV shows potential maximum value.
- •FDV is always higher than Market Cap. Large gaps indicate future dilution risk.
- •Smart investors always consider both numbers before investing.
Pro Tip: Market Cap tells you what exists now, FDV tells you what could flood the market later. Understanding both can help you make smarter, safer crypto decisions.
Bottom Line: Knowing the difference between Market Cap and FDV is essential for any crypto investor. It helps you spot overvalued projects, understand tokenomics, and manage risk effectively. Before investing in any token, always check both Market Cap and FDV, it can save you from serious losses.