How can I calculate the fully diluted valuation of a cryptocurrency?

Fully diluted valuation, which multiplies a cryptocurrency's maximum supply by its current market price, provides insight into its potential maximum value and long-term investment potential.

Nov 03, 2024 at 07:09 pm

How to Calculate the Fully Diluted Valuation of a Cryptocurrency

1. Understand the Concept of Fully Diluted Valuation:

• Fully diluted valuation reflects the total value of a cryptocurrency if all its potential tokens or coins were released into circulation.
• This considers the maximum supply, not just the current circulating supply.

2. Identify the Maximum Supply:

• Check the cryptocurrency's whitepaper or website for the specified maximum supply.
• The maximum supply represents the total number of tokens or coins that can ever be created.

3. Determine Current Market Price:

• Obtain the current market price of the cryptocurrency from a reputable cryptocurrency exchange.

4. Calculate Fully Diluted Valuation:

• Multiply the maximum supply by the current market price.
• Fully Diluted Valuation = Maximum Supply x Current Market Price

Example:

Imagine a cryptocurrency with:

• Maximum supply: 1,000,000 tokens
• Current market price: $5 per token

Fully Diluted Valuation:

• $5 x 1,000,000 = **$5,000,000**

Benefits of Calculating Fully Diluted Valuation:

• Provides a potential maximum value of a cryptocurrency.
• Helps evaluate the long-term investment potential.
• Compares different cryptocurrencies based on their future supply.