FDV: The Most Controversial Metric in Crypto Is Back. Here's What You Need to Know

Fully-diluted value, or FDV, is among the most controversial topics in crypto. But what exactly is it, and why did Binance's commentary set the crypto community aflutter?

The ‘fully-diluted value’ of tokens has become a contentious topic once more. Here's what FDV is, and why Binance’s commentary on the matter set crypto community abuzz.

Fully-diluted value, or FDV, is a measure of a cryptocurrency’s market capitalization if all of its tokens were in circulation. It is often used to compare the relative valuations of different cryptocurrencies, as market capitalization can be distorted by the varying circulating supplies of different tokens.

For example, Bitcoin has a fully-diluted value of around $1.3 trillion, even though its market capitalization is currently only around $700 billion. This is because there are still around 2.3 million Bitcoin that have not yet been mined and entered circulation.

Binance’s commentary on FDV focused on the increasing number of tokens that are being launched with a limited circulating supply and sky-high fully-diluted valuations. According to Binance Research, the total FDV of tokens launched in the first two months of 2024 is already approaching the total FDV of all tokens launched in 2023.

This trend has sparked concerns among some crypto enthusiasts, who argue that the eventual release of all of these tokens will put downward pressure on their price. It could also make the price of the tokens more sensitive to large or frequent trades.

However, others have defended the high FDV of newly-launched tokens, arguing that it is a natural consequence of crypto’s strong rally earlier this year. They also point out that most new tokens listed on Binance have lost value since their listing date.

In his essay, Cobie argues that the increasing private-market participation in new token launches is leading to a situation where retail investors are unable to profit from future growth in the price of the tokens. He also claims that a greater share of tokens’ price discovery is now taking place in private markets.

This trend is evident in the diminishing returns on newly-launched tokens over the past several years. According to Cobie, it is now "impossible" to be early to new token launches.

As a form of protest, Cobie suggests that retail investors should opt out and avoid participating in new token launches.