Recently, I’ve noticed that many beginners overlook a key indicator when evaluating crypto projects, which is the true meaning of FDV (Fully Diluted Valuation). Many people only look at the circulating market cap when placing orders, only to be hit hard by future token releases.

Let's start with the most straightforward example. Imagine you buy a project that currently appears to have a low market cap, but have you considered what would happen if all the locked tokens were unlocked? This is the core concept of FDV — it reflects the project's true potential value once all tokens are in circulation.

How exactly is it calculated? The formula is quite simple: FDV = Total Supply × Current Token Price. For example, Bitcoin, with a current price of over $82K and a total supply of 21 million coins, has an FDV of roughly $1.6 trillion. In comparison, its circulating market cap is about $1.65 trillion, indicating that Bitcoin’s token release is mostly complete, and the dilution risk in the future is relatively small.

On the other hand, projects still releasing tokens in early stages are different. For example, XRP, although currently priced at $1.45, has a total supply of 100 billion coins, with only about 62 billion in circulation. This means there are still a large number of tokens to enter the market. If you don’t fully consider this, the investment risk can be significant.

Simply put, FDV gives you a “panoramic view” of the project, rather than just a “partial” snapshot of the current situation. Many people make the mistake of thinking they’ve found a bargain with low market cap projects, but if the FDV is far higher than the market cap, it indicates potential severe value dilution in the future.

I’ve summarized a few common scenarios of market cap and FDV combinations: low market cap with high FDV usually means the project is still early, with potential but also high risk; high market cap with high FDV indicates the project is already recognized by the market, with decent growth potential; but the most dangerous is high FDV with low market cap, which suggests a large number of tokens are about to be unlocked, possibly causing a sell-off pressure.

This is why understanding FDV is so important for investment decisions. However, I also want to remind you that FDV is just a reference indicator; it assumes the token price remains unchanged, but in reality, token releases often lead to price drops, making FDV predictions inaccurate. You also need to consider the project's token release schedule, market competitiveness, development progress, and other factors to make more rational judgments.

In simple terms, FDV is a useful tool, but don’t rely on it blindly. Recently, I’ve seen many projects on Gate with FDV and market cap that differ greatly, which warrants deeper research into the underlying reasons. If you’re interested, you can look up the FDV data of projects you’re curious about, compare it with their market cap, and you’ll find many interesting investment opportunities.