Market cap is the current token price multiplied by the tokens circulating now. Fully diluted valuation (FDV) is that same price multiplied by the maximum supply allowed by the token’s rules. Market cap describes the value of the current float; FDV models the value at today’s price if the full potential supply were issued.
The difference is a supply-and-dilution warning, not a prediction. A large gap can mean substantial vesting, incentives, staking rewards, treasury reserves or future emissions. A small gap means less mechanical supply expansion, but it does not prove that a token is cheap, liquid, useful or safe. You still need to examine unlock dates, who receives new tokens, demand, liquidity, concentration and the quality of the supply data.
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What market cap and FDV actually measure
Market capitalization uses the circulating supply
The standard formula is market cap = current token price × circulating supply. Circulating supply is the number of tokens considered available in the market at that point in time. Binance describes it as tokens currently available to the public, while CoinMarketCap calls it the best approximation of assets in the public’s hands and compares it with a company’s public float.
For example, if a token trades at $2 and 30 million tokens are circulating, its market cap is $60 million. The calculation changes whenever the price changes or the reported circulating supply changes, so it is a snapshot rather than a permanent property of the project.
FDV uses the maximum supply
The standard FDV formula is FDV = current token price × maximum supply. It asks a conditional question: what would the project be worth at today’s price if every token allowed by the protocol or token rules were circulating? It is therefore a scenario based on a current price, not a forecast of the price or a promise that all tokens will be issued immediately.
If the same token has a 100 million maximum supply, its FDV at $2 is $200 million. The price is held constant in that arithmetic even though a real market could react when additional tokens are released.
Why neither number equals money invested
Market cap is a multiplication, not a ledger of dollars that entered the asset. Binance’s glossary states, “Market cap is not money inflow.” A small trade can establish a new price that is then multiplied by every circulating token. In a thin market, limited buy or sell orders can move the quoted price substantially, changing the reported market cap without an equivalent amount of new capital arriving.
FDV has the same limitation and an additional assumption: it applies today’s price to tokens that are not yet circulating. Neither metric tells you how much holders paid in aggregate, how much cash a project raised, or how much could be withdrawn at the displayed price.
Circulating, total and maximum supply: the three denominators
Supply labels are easy to confuse because each answers a different question. Confirm all three before comparing projects or calculating a ratio.
| Supply measure | What it counts | What it generally leaves out | How it is used |
|---|---|---|---|
| Circulating supply | Tokens regarded as available in the market now | Locked, reserved or otherwise unavailable tokens | Denominator for market cap |
| Total supply | Tokens already issued, including tokens that may be locked | Tokens that could be created in the future | Shows the amount minted so far; it is not automatically the market-cap denominator |
| Maximum supply | The largest supply permitted under the protocol or token rules, including future issuance | Nothing within that stated cap | Denominator for FDV when a credible maximum is defined |
A token can therefore have a total supply larger than its circulating supply, while its maximum supply is larger still. Locked allocations may already exist on-chain and count toward total supply even though they cannot be freely traded. Conversely, an emissions schedule can create tokens later, so those tokens are absent from both circulating and total supply until they are minted.
Definitions can vary by data provider. Wrapped versions on several chains, tokens held by a treasury, staked balances, burned coins and inaccessible contracts may be classified differently. A number is useful only when you know the provider’s methodology and the date of the estimate.
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Consider an illustrative token with a price of $2, 30 million circulating tokens and a 100 million maximum supply. These figures are arithmetic examples, not market data or a return forecast.
- Market cap: $2 × 30,000,000 = $60 million.
- FDV: $2 × 100,000,000 = $200 million.
- FDV-to-market-cap ratio: $200 million ÷ $60 million = 3.33×.
- Supply not currently circulating: 100 million − 30 million = 70 million tokens, or 70% of the stated maximum.
The 3.33× ratio describes the supply structure at that moment. It does not say the token will reach a $200 million market cap. Future releases may put downward pressure on price, demand may grow enough to absorb them, the maximum may be revised by governance, or some tokens may never be issued. Burns can reduce supply, and the quoted price can change before any unlock occurs.
How to interpret a wide or narrow FDV gap
A wide spread is a dilution prompt
When FDV is several times market cap, many tokens remain locked, reserved or unminted. Common release routes include team and investor vesting, community incentives, liquidity-mining rewards, staking rewards, grants and protocol emissions. The important follow-up is not simply “Is the ratio high?” but “When do those tokens arrive, who receives them and what might they do with them?”
A scheduled release can increase the circulating supply even if the project’s activity is unchanged. If demand does not expand at a similar pace, more tokens compete for the same buyers and the price may weaken. That outcome is possible, not automatic: a useful product, growing users or new capital can absorb supply. The ratio is a prompt to investigate the schedule and demand, not a standalone sell signal.
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A narrow spread reduces mechanical expansion
If circulating supply is close to maximum supply, fewer additional tokens can be introduced under the stated cap. That makes future dilution mechanically smaller than it is for a token with a large unissued reserve. It does not establish fair value. A token can have a near-fully-circulating supply and still suffer from weak demand, concentrated ownership, shallow liquidity, security problems or limited utility.
The ratio is descriptive, not a universal cutoff
There is no research-backed FDV-to-market-cap threshold that reliably predicts returns across crypto assets. A 1.2× ratio is not automatically safe, and a 10× ratio is not automatically overvalued. The same percentage gap can have very different consequences depending on whether releases occur tomorrow or over a decade, whether recipients sell, and whether trading liquidity can absorb them.
Also check how the ratio was produced. If one source uses a different circulating-supply estimate or treats a bridged token differently, two websites can show different market caps and FDVs for the same asset. Record the price timestamp and supply source before drawing a conclusion.
Why supply-data quality can change the answer
Verify the three figures separately
Do not replace circulating supply with total supply without saying so. A provider may report total supply accurately while estimating circulating supply from wallet labels, vesting documents or an internal methodology. Maximum supply may be fixed, variable, unlimited or not stated. If no credible maximum exists, an FDV number may be unavailable or depend on an assumption that must be disclosed.
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Look for the launch allocation, cliff dates, linear vesting periods, recurring emissions and any governance power to change them. Identify recipients: a release to a broad user-reward program has a different potential market effect from a release to a small group of early holders. Distinguish tokens that are already minted but locked from tokens that will be created only when rewards are paid.
Account for burns, staking and multiple chains
Permanent burns can reduce total or maximum supply, but only if the burn is reflected in the stated methodology. Staked tokens may remain economically exposed to the market even when they are not immediately liquid; providers can classify them differently. A token circulating on several networks may be counted once, counted per chain, or adjusted for canonical and wrapped representations. Check whether treasury wallets and inaccessible contracts are excluded from circulation.
Use a common timestamp
Price moves continuously, while supply dashboards update at different intervals. A market cap calculated with a current price and a stale supply estimate can look precise while combining observations from different times. Note the timestamp, exchange or index used for price, and the provider’s supply update date whenever you record a figure.
A practical process for comparing market cap with FDV
- Capture the price snapshot. Write down the token price, currency, time and source. If you are comparing projects, use the same time window and currency.
- Collect each supply measure. Record circulating, total and maximum supply as separate fields. Mark any value that is estimated, unavailable or defined differently by the provider.
- Reproduce the arithmetic. Multiply the price by circulating supply for market cap and by maximum supply for FDV. This catches unit errors such as confusing millions with billions.
- Calculate the descriptive ratio. Divide FDV by market cap when both are available. You can also compare the unissued share as
(maximum supply − circulating supply) ÷ maximum supply. Label both as supply indicators, not forecasts. - Map future releases. List unlock dates, cliff and vesting periods, recurring emissions, reward programs and any authority that can change the cap. Add the number of tokens and recipient category for each event.
- Test absorption capacity. Examine trading volume, order-book depth, liquidity across venues, holder concentration and the project’s demand drivers. A large release matters more when available liquidity is thin or ownership is concentrated.
- Recheck before acting or publishing. Prices and circulating supply are volatile. Refresh the figures and note any methodology change instead of treating an old ratio as current.
How future releases can play out
Unlocks with flat demand
Suppose an illustrative project releases 10 million tokens while user demand and available liquidity remain unchanged. The circulating denominator rises, so the market cap at an unchanged price rises mechanically. Sellers from the newly unlocked group may increase supply on exchanges, causing the price to fall instead. The actual result depends on recipients’ behavior and buyers’ willingness to absorb the tokens.
Unlocks with growing demand
If the project adds users, fees or another durable source of demand at the same time, new buyers may absorb the release. Price can remain stable or increase even as circulation expands. In that case, a high initial FDV gap was a risk to monitor, not proof of an inevitable decline.
Ongoing emissions
Some protocols release tokens continuously rather than on a few dates. Model the annual or monthly emission rate, who receives it and whether token demand is linked to network activity. A ratio based only on today’s maximum supply can understate the practical impact if governance can raise the cap or if the stated maximum excludes a future expansion mechanism.
Burns or a lower cap
A permanent burn can reduce the supply that will ever exist, narrowing the gap. Verify that the burn is irreversible and included in the provider’s maximum-supply definition. A one-time announcement without an on-chain reduction does not change the arithmetic.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Market cap, FDV and other valuation lenses
Market cap is most informative when you want the value of the currently tradable float. FDV is useful when you want to stress-test the project against its fully issued supply. Neither captures protocol usage, revenue quality, treasury assets or the price impact of selling.
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| Question | Most relevant figure or check | What it cannot answer alone |
|---|---|---|
| What is the value of tokens available now? | Market cap using a verified circulating supply | Whether the price is fair or whether holders can sell at that price |
| What would the value be if all permitted tokens existed? | FDV using a credible maximum supply | Whether all tokens will be issued, or what price will prevail then |
| How much dilution might occur? | Unissued share plus the unlock and emission schedule | How recipients will behave or how demand will change |
| Can the market absorb releases? | Liquidity, volume, concentration and demand analysis | A precise future price |
Common mistakes and how to avoid them
- Calling FDV the future market cap. FDV is today’s price multiplied by a future-sized supply. The future market cap can be higher or lower because price, supply rules and demand can all change.
- Assuming the gap equals guaranteed dilution. Tokens may vest slowly, remain in a treasury, be burned or never be minted. Use the schedule and token rules to determine what is plausible.
- Using total supply as circulating supply. Locked tokens can inflate the denominator and make market cap look too high. Report the substitution explicitly if a provider does not publish a verified float.
- Treating market-cap growth as cash inflow. Price appreciation applied to the existing float can increase market cap even when only a small amount traded.
- Ignoring liquidity. A displayed price from a thin order book may not be available for a large sale. Compare depth and concentration rather than relying on the headline number.
- Comparing stale snapshots. A ratio calculated last month may be invalid after a price move, unlock or supply-methodology change. Use synchronized timestamps.
- Overlooking governance powers. A stated maximum is less informative if a protocol can vote to raise it. Read the rule that controls issuance, not only the dashboard label.
- Assuming a low ratio means low risk. Near-complete circulation removes one source of dilution but says nothing about security, utility, demand, ownership concentration or operational execution.
Questions readers commonly ask
Is FDV higher than market cap by definition?
It is higher when the stated maximum supply exceeds circulating supply and the same positive price is used for both calculations. If the supplies are equal, the figures match. If a maximum supply is unavailable or defined differently, a provider may not publish a comparable FDV.
Does a token’s market cap show how much money went into it?
No. It estimates the value of the circulating supply at the latest quoted price. It does not total historical purchases, fundraising proceeds or the amount that could be withdrawn at that quote.
What does circulating supply mean in plain language?
It is the provider’s estimate of tokens currently available to the market, broadly analogous to a public float. Locked, reserved or otherwise unavailable balances are generally excluded, but the exact treatment depends on the provider’s methodology.
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Should I use market cap or FDV when comparing two tokens?
Use both, with the same timestamp and clearly defined supplies. Market cap helps compare the current float; FDV exposes potential supply expansion. Then compare release schedules, demand, liquidity and concentration before reaching a valuation judgment.
Can a high FDV-to-market-cap ratio ever be acceptable?
Yes. A project with strong, expanding demand may absorb scheduled releases, and a long vesting period can reduce near-term pressure. The ratio identifies what to investigate; it does not determine the outcome by itself.
Why do different websites show different market caps or FDVs?
They may use different prices, update times, circulating-supply estimates, maximum-supply assumptions or treatments of burns, staking, treasuries and bridged tokens. Compare methodology and timestamps before comparing the numbers.
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