Market capitalization estimates the value of circulating tokens at the current price. Fully diluted valuation, or FDV, applies that price to a broader supply figure, often maximum or total supply depending on the data provider. The gap highlights supply assumptions; it does not calculate future price or cash invested.
The two formulas
Market cap = token price × circulating supply.
FDV = token price × the supply figure used for full dilution.
CoinGecko’s methodology explains its circulating-supply approach. Its FDV glossary describes the theoretical valuation if the entire supply were circulating. Always check the displayed metric’s definition, especially where total and maximum supply differ or issuance has no fixed cap.
A worked example with invented numbers
Suppose a token trades at $2. There are 100 million tokens circulating and a stated maximum supply of 1 billion. Using maximum supply for FDV gives:
| Calculation | Result |
|---|---|
| $2 × 100 million circulating tokens | $200 million market cap |
| $2 × 1 billion maximum tokens | $2 billion FDV |
| $200 million ÷ $2 billion | 10% market-cap-to-FDV ratio |
This means the circulating-supply figure is one tenth of the supply used in that FDV calculation. It does not mean the token is automatically cheap, that the other 90% will arrive immediately, or that its price must fall 90%.
Now suppose another 100 million tokens become circulating. If price stayed at $2, market cap would become $400 million. If instead market cap stayed at $200 million, the implied price would become $1. Both are arithmetic scenarios, not forecasts. The actual market can change price, circulating supply, and aggregate valuation together.
Why market cap is not money invested
A marginal trade can change the quoted price used to value every circulating unit. No matching amount of fresh cash has to enter the market for that multiplication to rise. Similarly, holders cannot assume they could sell every token at the last traded price.
For example, marking ten million units at $1 creates a $10 million market-cap calculation. If a small trade moves the reference price to $1.10, the displayed result becomes $11 million. That arithmetic does not establish that $1 million was deposited by new investors. Compare CoinGecko’s explanation of market capitalization.
What to inspect behind a large FDV gap
An unlock schedule adds timing and ownership context that a single ratio lacks. Ask which holders receive tokens, whether transfer restrictions expire gradually or at once, and whether the circulating-supply provider already counts the allocation.
An unlocked token is eligible to move under the relevant rules; it is not proof of an immediate sale. A published schedule also needs verification against the project’s current documentation and on-chain contracts. A slide deck from an old fundraising round may no longer describe the implementation.
Record the source, observation date, circulating supply, dilution denominator, next relevant release, and any uncertainty. If two data sites disagree, first compare their definitions rather than averaging incompatible figures.
What neither metric measures
Neither market cap nor FDV establishes revenue, profitability, tokenholder legal rights, liquidity, or a fair purchase price. Comparing two projects solely because their FDVs match can hide very different supply rules and economic functions.
A useful valuation note keeps the arithmetic separate from the thesis. “Only 10% of the maximum supply circulates” is a supply observation. “Demand will grow faster than issuance” is an assumption that needs its own evidence.
Frequently asked questions
Is lower FDV always better?
No. A lower theoretical valuation says little without understanding the token’s function, supply assumptions, trading conditions, and project risks.
Can FDV change without an unlock?
Yes. A change in the reference price changes FDV even when the supply denominator stays the same.
Is circulating supply identical everywhere?
Not necessarily. Providers can classify restricted, treasury, or otherwise unavailable holdings differently. Check methodology before making a comparison.
Continue learning
Read crypto liquidity versus volume to understand why a valuation number does not tell you how easily a position can be traded.
For educational purposes. Views should be assessed against their evidence and publication date.
