Market Cap vs Fully Diluted Valuation | Tokenomics & Valuation

TOKENOMICS & VALUATION · VALUATION METRICS

Market capitalisation values the circulating supply at the current price. Fully diluted valuation (FDV) applies that price to the maximum or fully diluted supply assumption. The gap is best understood as a dilution map, not as a forecast.

Risk first. A low market cap beside a very high FDV can make an asset look cheaper than its future supply structure suggests. FDV also assumes today's price could apply to tokens that are not yet circulating—an assumption that often fails.

Last reviewed: 21 August 2026 · Educational content only

Concept
Mechanics
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Worked example
Mistakes
Checkpoint
FAQ

Core concept

Market cap is normally current token price multiplied by circulating supply. It answers: what is the market value of the supply currently counted as circulating?

FDV is normally current token price multiplied by a maximum or fully diluted supply figure. It asks a broader hypothetical question: what valuation would the whole modeled supply have if every relevant token existed in circulation at today's price?

Market cap = price × circulating supply FDV = price × fully diluted supply Circulating ratio = market cap ÷ FDV

The ratio between the two is useful because it highlights how much dilution is still outside the current float. But the ratio does not tell you when tokens arrive, who receives them, what their cost basis is, or whether future demand will grow enough to absorb them.

How to analyse the gap

Confirm the project's actual supply definitions. Data providers can treat maximum supply, treasury holdings, burns or unminted tokens differently.
Map scheduled unlocks by month or quarter rather than focusing only on the eventual maximum supply.
Separate vested from liquid: a token can become legally/contractually unlocked without being sold immediately.
Compare new supply with realistic exchange/DEX liquidity, protocol demand and holder incentives.
Check emissions from staking, liquidity mining or ecosystem rewards in addition to one-off unlocks.

Analytical discipline: FDV is a scenario metric. Treating it as a target future market cap is a category error because both price and supply can change before full dilution.

Key distinctions

Metric	Supply denominator	Main use
Market cap	Circulating supply	Current float valued at current price
FDV	Maximum/fully diluted supply	Dilution-aware valuation reference
MCap/FDV	Market cap ÷ FDV	Approximate share of modeled valuation already circulating

Near-term question

How much new supply becomes liquid over the next 3–12 months relative to today's float and normal trading volume?

Long-term question

Does token demand or value accrual plausibly scale as the supply base expands?

Worked example

A token trades at £2 with 100 million circulating tokens and 500 million fully diluted tokens. Market cap is £200m; FDV is £1bn; the circulating ratio is 20%.

Now suppose 50m additional tokens unlock over the next year. That is a 50% increase relative to today's circulating supply, even though it is only 10% of the fully diluted total. For execution and price-pressure analysis, that near-term 50% expansion is often more relevant than the distant £1bn FDV headline.

Decision discipline: next ask who receives the 50m tokens, their likely holding/selling incentives, the unlock cadence, and how much genuine two-sided liquidity exists. The calculation identifies a pressure point; it does not predict direction.

Common mistakes and misunderstandings

Calling a low market-cap token “cheap” while ignoring a much larger future supply.
Treating FDV as a prediction that future market cap will equal today's FDV.
Comparing FDVs without checking whether supply definitions are consistent.
Assuming every unlock becomes immediate sell pressure.
Ignoring treasury emissions, staking rewards or incentive programmes because they are not labelled “unlocks”.

Do not optimise one number. A low MCap/FDV ratio can signal major dilution, but a high ratio can coexist with weak demand or overvaluation. Supply structure is one part of valuation.

Knowledge checkpoint

A token has £300m market cap and £1.2bn FDV. What does the 25% ratio tell you, and what important facts does it omit?
Why can a very high FDV exaggerate practical near-term valuation pressure?
If 20% of total supply unlocks next year but only 25% is currently circulating, what comparison should you calculate before judging the size of the event?
Why is recipient cost basis useful context without proving that recipients will sell?

FAQ

❓ Is lower FDV always better?

No. Lower modeled dilution can help, but valuation still depends on growth, demand, utility, revenue, governance and risk.

❓ Can FDV be ten times market cap?

Yes. It can occur when only a small share of the eventual modeled supply is circulating.

❓ Does an unlock automatically reduce price?

No. It increases potential supply. Price impact depends on holders, market expectations, liquidity and demand.

❓ Should I use market cap or FDV?

Use both. Market cap anchors today's circulating valuation; FDV adds dilution context. Then inspect the actual unlock and emission schedule.

Summary

Market cap measures current circulating valuation.
FDV applies today's price to a broader future-supply assumption.
The market-cap/FDV gap is most useful when combined with unlock timing, emissions, holder incentives and liquidity.
Neither metric is a standalone fair-value estimate.

This building block explains valuation mechanics and risk; it does not provide a trade recommendation.