What Is Fully Diluted Market Cap

If you want to find out what a fully diluted market cap is, you’ve come to the right place. In this guide, we’ll explain what this term indicates and how to calculate the fully diluted market capitalization of cryptocurrencies. We’ll also list the main differences between a market cap and a fully diluted market cap. This will help you better understand their role in the crypto space.

With that in mind, here’s how to use the fully diluted market cap to predict how a certain cryptocurrency will perform in the future.

What Is a Fully Diluted Market Cap?

What does a fully diluted market cap mean? A fully diluted market cap, aka fully diluted valuation or FDV, describes the market cap of a crypto project after it releases all of its tokens into circulation. It’s obtained by multiplying the current price of a particular cryptocurrency by the number of its total token supply. This metric helps crypto analysts estimate how a certain cryptocurrency could perform in the future.

For example, FDV is used to predict the future market cap of crypto projects. If a certain token reaches its maximum supply, its fully diluted market cap should be equal to its market cap. If there is a big difference between a market cap and a diluted market cap, it’s a sign that the said cryptocurrency is overvalued.

Fully diluted capitalization is also used to evaluate the value of crypto projects during their presales.

Market Cap vs. Fully Diluted Market Cap

Now that you know what a fully diluted market cap is, here’s how it differs from a standard market cap:

MC Focuses on the Current Value of Coins in Circulation, While FDV Represents Their Hypothetical Future Value

Market cap, or MC, describes the sum of all mined coins currently in circulation and shows the current value of a cryptocurrency on the crypto market. A higher market cap means that a certain cryptocurrency is more popular and stable than its low-cap peers. For example, a token with a low market cap will represent a higher investment risk because it will have low liquidity.

On the other hand, while MC focuses on the current value of coins in circulation, FDV focuses on their future value. I.e., it helps investors evaluate whether a particular token has growth potential based on its total rather than circulating supply.

Market Cap Cannot Predict How a Certain Currency Will Perform in the Future

As mentioned above, MC shows how much a particular cryptocurrency is worth based on its circulating supply. This shows the current market sentiment of a cryptocurrency. FDV shows how a token will perform in the future based on its total supply. This reflects its broader potential.

FDV assumes that the MC of a cryptocurrency will grow proportionally with its circulating supply. This will ultimately increase its value. A large, fully diluted market cap means that a considerable number of tokens will soon enter circulation — that new tokens will be released on the crypto market. MC and FDV are also calculated in a different way.

How Is FDV Calculated?

A fully diluted market cap is calculated by multiplying the current token price by its maximum supply. For example, BTC has a total supply of 21 million, while its current price is $63,573. To calculate its fully diluted market cap, you will have to multiply 21 million by 63,574. This means that its fully diluted market cap will be around $1.335 billion.

As mentioned above, the fully diluted market cap formula differs from the standard market cap formula. On that note, to calculate the market cap of a cryptocurrency, you’ll have to multiply its circulating supply by its current price. For example, BTC currently has a circulating supply of 19.73M, while its present price is $63,573. This means that its current market capitalization will amount to around $1.254 billion.

Conclusion

What is a fully diluted market cap or value? FDV is a metric that allows investors to estimate how a cryptocurrency will perform in the future. It is calculated by multiplying the token’s current price by its maximum supply.

A fully diluted market cap must be similar to a specific cryptocurrency’s standard market cap. A large difference between the two indicates that the token is overvalued.

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