What Is Market Cap?
Market cap = current price × circulating supply. It estimates the total market value of tokens actually in circulation. It's the most common size comparison between crypto assets, but it only reflects what's currently tradable — not the full picture of potential future supply.
What Is Fully Diluted Valuation?
FDV = current price × maximum supply. It's the theoretical total market value if every token that could ever exist were circulating at today's price — sometimes called fully diluted market cap. FDV assumes the current price holds even as all remaining supply enters circulation, which it may not. It's a ceiling estimate, not a prediction.
Example: $3 price × 500 million circulating = $1.5 billion market cap. $3 × 2 billion max = $6 billion FDV. The FDV is 4× the market cap — meaning 75% of maximum supply has yet to enter circulation.
Why the Gap Between Market Cap and FDV Matters
A large FDV gap signals future dilution risk. All the supply not yet circulating will enter the market at some point — through team vesting, investor unlocks, ecosystem rewards, staking emissions, or protocol incentives. When that supply arrives, demand must keep pace or the price faces downward pressure.
| Market Cap / FDV Ratio | What it means |
|---|---|
| More than 0.80 | Most supply already circulating; limited future dilution from unlocks. |
| 0.50–0.80 | Significant supply still locked; monitor unlock schedules. |
| 0.25–0.50 | Less than half of max supply circulating; future emissions may be substantial. |
| Less than 0.25 | Potentially large overhang — the market is implicitly pricing most supply at current levels. |
These are screening thresholds, not buy/sell signals. Context — vesting timelines, inflation rate, demand drivers — always matters more than the ratio alone.
What If There Is No Maximum Supply?
Some tokens (like Ethereum post-Merge, or governance tokens with perpetual staking rewards) have no hard maximum supply. FDV using the max-supply formula cannot be calculated. In these cases: use total supply as a proxy, model the emission schedule over 5–10 years, and compare annual issuance to trading volume and staking demand. Annual inflation rate becomes the key number to watch.
Using the FDV Ratio Correctly
The FDV ratio (market cap ÷ FDV, or equivalently circulating ÷ max supply) is most useful as a starting filter. A low ratio tells you to look closely at unlock schedules and vesting cliffs. A high ratio tells you the dilution risk is already largely baked in. Neither tells you whether the token is cheap or expensive on its own — you also need to assess utility, demand, and the inflation and emissions rate.
Frequently Asked Questions
What is fully diluted valuation in crypto?
FDV is the theoretical total market value if every token that could ever exist were circulating at the current price — calculated as price × maximum supply.
Is a high FDV always bad?
Not automatically. FDV is most concerning when large amounts of non-circulating supply are scheduled to unlock soon, relative to current trading volume and demand.
What is a good market cap to FDV ratio?
A higher ratio (market cap closer to FDV) means most supply is already circulating. A ratio below 0.25 means more than 75% of maximum supply has yet to enter circulation.
Can FDV be calculated if there is no maximum supply?
If a token has no defined maximum supply, FDV cannot be calculated using the max-supply formula. Total supply or a projected supply figure is sometimes used instead.