What is the difference between market cap and FDV (Fully Diluted Valuation)?

Market Cap Definition and Calculation

1. Market cap represents the total value of all currently circulating tokens at the prevailing market price.

2. It is calculated by multiplying the circulating supply by the current token price.
3. This metric reflects investor sentiment toward assets actively traded in the open market.
4. Tokens locked in vesting schedules, team allocations, or unissued reserves are excluded from the calculation.
5. Exchanges and data aggregators display market cap as a primary indicator for ranking cryptocurrencies.

FDV Definition and Calculation

1. FDV stands for Fully Diluted Valuation and assumes all tokens—circulating, reserved, vested, and yet-to-be-minted—are issued and valued at the current market price.

2. It multiplies the maximum possible token supply by the current token price.
3. Projects with long-term vesting cliffs or scheduled emissions often show FDV significantly higher than market cap.
4. FDV serves as a theoretical upper bound on valuation if every token were instantly liquid and priced identically.
5. Analysts use FDV to assess long-term inflationary pressure and potential future selling pressure from unlocked tokens.

Key Structural Differences

1. Circulating supply is dynamic and changes with network activity, unlocks, and burns—market cap shifts accordingly.

2. Maximum supply is typically fixed by protocol design, making FDV more static unless governance modifies tokenomics.
3. A low market cap relative to FDV may signal high future dilution risk, especially in early-stage protocols.
4. Market cap captures real-time liquidity depth; FDV reveals structural capitalization under full issuance assumptions.
5. Token sales, airdrops, and staking rewards directly impact circulating supply but do not alter FDV unless max supply is redefined.

Interpretation in Trading Contexts

1. Traders monitor divergence between market cap and FDV to anticipate volatility spikes around unlock events.

2. Arbitrageurs compare FDV across similar protocols to identify relative overvaluation or undervaluation in early funding rounds.
3. On-chain dashboards highlight FDV/market cap ratios to flag projects where >80% of tokens remain non-circulating.
4. Liquidity providers factor in FDV when assessing long-term viability of pool incentives tied to native token emissions.
5. Short-term speculators often ignore FDV, while macro-focused funds treat it as a ceiling for sustainable valuation growth.

Common Questions and Answers

Q: Does FDV include tokens that have been burned?A: No. Burned tokens are permanently removed from both circulating and maximum supply. FDV uses the adjusted maximum supply post-burn.

Q: Can FDV be lower than market cap?A: No. FDV is always equal to or greater than market cap because maximum supply is never less than circulating supply.

Q: Why do some DeFi protocols show FDV equal to market cap on CoinGecko?A: That occurs when circulating supply equals maximum supply—common in coins with no future minting schedule or pre-mined models like Bitcoin.

Q: How does staking affect market cap calculations?A: Staked tokens remain part of circulating supply unless they are locked in a non-transferable, protocol-enforced contract that removes them from market availability.