Using FDV and Circulating Supply to Assess Token Dilution Risk
Summary
The document defines fully diluted valuation as total token supply multiplied by the current token price. It uses FDV alongside market capitalization to reason about how much future token unlocks could dilute current holders, and presents the FDV-to-market-cap ratio as a rough indicator of how much supply is already circulating. Examples contrast a project with a small circulating share and one with nearly all tokens in circulation. Lock-up periods are also noted as a tokenomics choice that can delay dilution while restricting near-term liquidity.
The article cautions that FDV assumes all tokens would trade at today’s price, even though unlocks can change supply and price. It says the metric is less useful for uncapped-supply assets and recommends considering other measures, including total value locked and transaction activity. Its ratio thresholds and project examples are presented without a supporting empirical method, so FDV should be treated as a screening measure rather than a standalone valuation or stability test. The discussion also touches on stablecoin-focused infrastructure and regulatory interest, but does not quantify their effects on FDV.
Key ideas
- FDV is calculated by multiplying total token supply by the current token price.
- Comparing FDV with market capitalization can reveal how much supply remains outside circulation and may later unlock.
- Long lock-ups can defer dilution but may reduce near-term liquidity.
- FDV assumes the current price applies to all tokens and can misstate valuation during volatile unlocks.
- FDV is less informative for uncapped-supply assets and should be considered alongside activity and liquidity measures.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.