What Is FDV in Crypto & How Do You Calculate It?

Often, crypto investors focus on market capitalization, which is the total value of all the coins or tokens in circulation. However, fully diluted valuation (FDV) measures the value of the currently circulating supply as well as the additional supply that may come online later. In this guide, we’ll answer the question, “What is FDV in crypto?” and learn how to evaluate FDV before making a trading decision.

Fully diluted valuation and fully diluted market capitalization both measure the total value of a crypto asset once all the overhanging supply is released. However, fully diluted valuation is commonly seen with initial coin offerings (ICOs) and pre-launch coins, whereas fully diluted market cap often refers to coins trading on crypto exchanges. Nonetheless, you might see either term used. Let’s look at fully diluted valuation in crypto and why it matters.

Fully Diluted Valuation (FDV) Explained

FDV refers to the value of the total supply of a cryptocurrency, including the supply that has yet to be released. This metric helps you make more informed investment decisions because it multiplies the current token price against the total supply once locked tokens or yet-to-be-mined coins come to market.

Key Takeaways

Fully diluted valuation is most commonly used in reference to presale or ICO tokens, although some data providers use the term interchangeably with fully diluted market capitalization.
You can calculate the FDV by multiplying the current token price by the total number of tokens once all supply is released.
Some projects might change allocations or mint additional tokens, making FDV an inaccurate metric in some cases.
FDV lets you compare valuations for similar projects, even if they are at different points in their distribution schedule.
A market capitalization to fully diluted valuation ratio of 60% or higher indicates a safer investment in regard to overhanging supply.

How Is FDV Calculated?

To calculate the fully diluted value, multiply the current price per token by the total number of tokens that will be available after unlocks. To make the concept clearer, let’s look at an example.

The $ZON token offers a good example of FDV in crypto and why it matters.

According to the tokenomics published on the ZON website, the presale allocated 70 million tokens. However, the total supply is one billion tokens.

As of this writing, the presale price is $0.0051 per $ZON token. To calculate the FDV, multiply the per-token price by the total supply of one billion.

1,000,000,000 * $0.0051 = $5.1 million FDV

FDV vs. Market Capitalization

In contrast to FDV, the current market cap only considers the circulating supply to calculate the value. FDV looks at the total token supply. For example, we can look at Toncoin (TON). Let’s gather the relevant numbers first.

Token Price: $5.45
Circulating Supply: 2,533,054,436
Total Supply: 5,111,902,435

Market Cap: $13.8 billion
Fully Diluted Valuation: $27.8 billion

Only about half of the total supply is in circulation, so TON’s current market capitalization is about half of its fully diluted valuation. The market cap reflects the current market value. However, the price per token could change dramatically, particularly if new demand can’t keep up with new supply coming to market in the future. This makes FDV an important metric to understand. An FDV dramatically higher than the market cap could indicate downside risk as more supply comes online.

Why Is Fully Diluted Value Important?

Fully diluted value provides a long-range view that accounts for future changes in circulating supply. The market cap for a cryptocurrency project with 10 million tokens circulating becomes less meaningful if the total supply will be 100 million. In this example, 90% of the supply will come to market later and will create downward price pressure if demand doesn’t increase dramatically.

However, FDV serves another purpose as well. Comparing the FDV for similar projects allows you to assess the token prices of tokens at different stages of distribution or with different amounts of tokens. For example, FDV allows you to compare Bitcoin to Litecoin, even though Litecoin has four times the total supply of coins. FDV also allows you to compare the value of XLM (60% in circulation) to XRP (56% in circulation), even though these two coins are at slightly different distribution stages.

FDV alone can’t always point to the better value. You must also consider adoption, governance, regulatory challenges, and liquidity. However, FDV in crypto can often shine a light on potential risks or opportunities that the market cap doesn’t address.

How to Check a Crypto’s FDV

You can use a crypto data website like CoinMarketCap to check the FDV for a cryptocurrency project you’re researching. CoinMarketCap uses the term fully diluted market capitalization rather than fully diluted value. CoinGecko offers similar token metrics but uses FDV rather than a fully diluted market cap. In this context, the terms are synonymous. Let’s look at XLM on CoinMarketCap.

CoinMarketCap does the math for you. In this example, you can see that about 60% of the supply is already in circulation, leaving about 40% to be distributed. Correspondingly, the market capitalization is about 60% of the fully diluted market capitalization, a synonym for fully diluted valuation in this case.

However, you won’t find every token listed on websites like CoinMarketCap or CoinGecko. Newer tokens, ICOs, and presale coins may require doing the math yourself. You can usually find the total supply on the project’s website or in the whitepaper. Multiply the current token price by the total supply to calculate the fully diluted value.

FDV in Trading and Crypto Project Valuation

A cryptocurrency with a low market cap compared to its fully diluted value could be described as inflationary. While the total supply may or may not be a fixed amount, a large percentage of the total supply will come to market in the future on crypto exchanges.

This becomes particularly important when investing in newer projects in which a small percentage of the total supply is circulating. These are often described as high FDV, low float projects, a term typically applied to projects with a market cap to FDV ratio of less than 0.5 (50%). More than half of the supply will come to market later. Generally, projects with an MC/FDV ratio of 60% or higher are considered safer.

High FDV, low float projects can be particularly risky because the low amount of tradable tokens makes price discovery difficult and price manipulation relatively easy due to thin liquidity. In short, the current token price might not hold.

Currently, more than 20% of the top 300 cryptocurrencies by market capitalization are low float projects. Projects with a longer history typically boast a higher market cap to FDV ratio, leaving less room for uncertainty and more accurate price discovery. Toncoin provides one example. Just under half of the total supply is in circulation, with the other half yet to reach the market.

How Accurate is FDV in Crypto?

FDV provides a clearer picture of a token’s price, but it isn’t always an accurate way to predict future price action. While the math follows a simple formula, several factors can change the price trajectory. These range from adoption to competitors to supply changes or even regulatory challenges.

For example, the Radiant Capital DAO (decentralized autonomous organization) voted to increase the token supply by up to 50%. The effects of an increase in supply combined with a soft market proved disastrous for the RDNT token price, which cratered by more than 66% on the one-year chart shown below.

This example also demonstrates that FDV isn’t always accurate. Prior to the DAO vote, tools like CoinMarketCap showed a maximum supply of one billion tokens. Now, the maximum supply is shown as 1.5 billion tokens.

In some cases, FDV can’t be calculated at all. For example, Ethereum has no cap on the amount of ETH tokens. This makes it impossible to calculate the FDV. However, the protocol burns base fees on the network while minting new ETH to pay staking rewards. The result is a largely stable ETH supply.

Limitations of Using FDV in Crypto

The dramatic increase in supply for RDNT highlights one of the limitations of using FDV to make investment decisions. When using FDV as a metric, you should also consider potential changes to supply or restrictions to supply. For example, minting new tokens increases supply, whereas burning tokens decreases supply.

Minting: RDNT offers one example of a token that has minting enabled. This means that more more tokens may become available and small investors may not have much say in the matter. Research whether additional tokens can be minted and which process is required for such a change.
Burning: Token burning refers to sending tokens to an unrecoverable address, reducing the supply. FDV cannot account for this change in supply until the tokens are burned. For example, a varying amount of BNB tokens are burned quarterly.
Token Locks: In many cases, early token purchases and team allocations are locked, meaning they can’t be sold until a specific date. However, a token lock that is still years away from unlocking might not bring as much risk if the project is growing and demand is high. Investigate when tokens unlock to make a more informed decision.
Changes in Demand: FDV enables value comparisons for similar projects. However, fully diluted valuations don’t provide any insight into future demand. Without additional research into the prospects for demand, FDV only tells part of the story.

Conclusion

FDV in crypto measures the total market value of a cryptocurrency once all of the supply reaches circulation. Fully diluted valuation allows you to compare the values of similar cryptocurrencies, including comparing well-established projects to newly launched projects. However, this metric isn’t perfect for every situation. Minting or burning tokens can change the maximum supply, making FDV calculations from before the minting or burning event less telling.