If every token that could ever be issued were already in use and priced at the current rate, the theoretical market value of that cryptocurrency would be represented by its Fully Diluted Valuation (FDV). This means when all locked, vested, and reserved tokens are released, it offers an estimate of the project’s possible market capitalization. FDV, also known as the fully diluted market cap, is a useful measure of the project’s final valuation and dilution risks.
In crypto, not all tokens are released all at once. Some are locked away for future use, like rewards or team allocations. The regular market cap only counts tokens that are currently circulating. To put things into perspective, let’s take Bitcoin’s FDV, this would eventually reach 21 million coins, since there is no infinite supply. But currently, there are about ~19.88 million BTC that have been mined, and it trades at $91,370 (on Nov 27), this would take its market cap to $1,82T, whereas its FDV at $1.91T.
But, if you were to consider a new meme coin with a 1 billion max supply, priced at $0.01 with only 200 million in circulation, its current market cap would be $2 million, whereas its FDV is $10 million. The FDV shows what the project could be worth fully ‘diluted’ when all tokens enter the market.
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It makes future risks and possible hidden dilution more visible to investors. Although a low market capitalization may appear inexpensive, a high FDV alerts investors to potential price declines as more tokens flood the market, further diluting the market. When assessing new or early-stage tokens, FDV is utilized because it aids in determining any potential overvaluation.