FDV—Interpreting the Hidden Value of Encryption Projects

The Core Meaning of FDV

When evaluating a cryptocurrency project, the full diluted valuation ( FDV ) is a key indicator that cannot be ignored. FDV refers to the total market value of the project assuming all possible issued tokens have entered the circulating market. The calculation is straightforward: multiply the current token price by the maximum token supply of the project.

For example: if a certain token is priced at $5 and the maximum supply set by the project is 100 million tokens, then the FDV of this project would be $500 million. This figure can help investors anticipate the value range of the project in a fully diluted state.

FDV and Market Capitalization: Understanding the Differences Between the Two

Many novice investors easily confuse FDV and market capitalization (börsvärde). In fact, the two measure completely different dimensions:

Market capitalization focuses on the current situation — it only calculates the number of tokens currently being traded multiplied by the price. If a project has 10 million tokens in circulation, priced at $5 each, the market capitalization would be $50 million.

FDV Outlook for the Future - It assumes that all tokens will eventually enter the market. For the same project, if the maximum supply is 100 million tokens, the FDV jumps to $500 million.

What does the huge gap between these two numbers often imply? A large number of tokens are still locked, waiting to be unlocked at some point in the future. Once these tokens flood into the market, they could have a significant impact on the price.

Why Pay Attention to the FDV Release Mechanism

The unlocking method of tokens determines the actual significance of the FDV metric. Some projects adopt a gradual unlocking strategy, slowly releasing tokens through staking rewards or vesting plans for team members. However, there are also projects that may unlock a large amount in a short period of time, which can put serious pressure on the price.

Investors need to have a deep understanding of:

• How many tokens will be unlocked each quarter or month?
• Is the unlocking concentrated at a certain point in time?
• Is there a price protection mechanism to combat dilution effects?

Risk Warning When Using FDV

FDV has obvious limitations and should not be considered the only evaluation tool. The key assumption is that when the token supply increases, the price remains unchanged. However, the reality of the crypto market is quite the opposite—prices often fluctuate dramatically.

Another common pitfall is neglecting the fundamentals of a project. Even if the FDV seems reasonable, if the project lacks a real user base, innovative capability, or clear application scenarios, a high FDV may indicate risk. This is especially true for meme coins with extremely large supply, where the reference value of the FDV indicator is nearly zero.

A more pragmatic approach is to observe whether the project continues to expand user demand when new tokens are supplied. Only the growth in demand can offset the negative impact of supply dilution, thereby maintaining the long-term value of the project.

Comprehensive Evaluation of the Project's Correct Posture

FDV is just one tool in the assessment toolkit. A complete project evaluation should also include:

• Team Strength and Background: The industry experience of the founder and core members
• Token Economic Design: Is the incentive mechanism scientific and reasonable?
• Trading Heat: The actual participation and liquidity of the market
• Ecological Application: Token's practical application scenarios in the project ecosystem.

By comparing FDV with market capitalization and considering these factors for a comprehensive judgment, one can more accurately assess the true investment value of a crypto project.