As a large number of Token from many projects are about to be unlocked, investors are increasingly paying attention to the impact of Fully Diluted Market Capital (FDV) on price fluctuations. FDV not only reflects the current value of an asset but also includes all potential assets that may appear in the future. This helps to more comprehensively and clearly evaluate the true value of a cryptocurrency or stock. In today's article, let's learn about this important index with Coinmoi.
What is FDV?
FDV is the total value of a cryptocurrency project if all of its Token were released into the market at the current time. In other words, FDV tells us the maximum value a project can achieve.
For example, if the price of a Token is $1 and its Max Supply is 1 billion Token, then the FDV will be $1 billion. This means that if all 1 billion Token are issued, the total market value of the project will be $1 billion.
Unlike Market Capital (MC), which only reflects the value of the Token in circulation, FDV represents the project’s overall valuation in the current market. However, since most blockchain projects only issue a small portion of Token initially and unlock them over time, this metric may not accurately reflect the initial real value and is susceptible to volatility.
The role of FDV
Before listing on an exchange, projects often go through several rounds of Capital, announcing the amount of Capital raised and the corresponding valuation. This valuation is the FDV at the time of the Capital round, and it allows investors to visualize the potential value of the project when all Token are issued:
- FDV helps investors estimate the final value of a project, XEM the total amount of Token that will be issued in the future.
- By combining FDV with tokenomics (including allocation ratios and Token Lockup unlock schedules), investors can predict the value of the Token an entity owns after all Token are unlocked.
- FDV helps investors better understand the risks associated with Token Lockup unlocking. As Token are released gradually on a scheduled basis, the actual value received by investors can fluctuate greatly based on the market.
- FDV provides a clear view of a project's Token structure, helping investors make more informed decisions when investing in cryptocurrency projects.
Compare FDV and Market Cap
Market Capital : The Market Cap of a cryptocurrency is calculated by multiplying the total number of Token in circulation by the current price of each Token. For example, if there are 10,000 ABC Token in circulation with each Token worth $1, then ABC's Market Cap would be $10,000. The Market Cap represents the current value of a project based on the number of Token actually in circulation.
Fully Diluted Capital (FDV) : FDV extends the concept of Market Cap by calculating the value of the project if all potential Token are issued. For example, if the ABC cryptocurrency has a Max Supply of 1 million Token, its FDV will be $1 million, assuming the price of each Token remains at $1. This metric helps investors visualize the total value of the project when all Token are released to the market.
FDV provides a broader view of the potential value of a project or company, while Market Cap only reflects the current value based on the outstanding Token or shares. By XEM both FDV and Market Cap, investors can make more accurate investment decisions, especially in highly volatile markets like crypto or in companies with many options and convertible debt.
How to use FDV effectively in investment
- Determine the fund's purchase price: Calculate the price at which funds have purchased in different Capital rounds. Compare this price with the current market price to assess the risk level of the investment, especially when there are many Token left to unlock.
- Price Behavior Prediction: Analyze the proportion of Capital rounds to predict price behavior when Token are unlocked, helping to make rational investment decisions.
- XEM additional factors: Combine FDV with other factors such as market trends, project overview information, and pre-market transactions for a comprehensive assessment before investing.
- Understand your own playstyle: Choose projects that fit your personal investment strategy, whether short-term or long-term, to effectively manage risk.
Summary
In short, FDV is an important tool in valuing and predicting the price behavior of Token in the crypto market. When used properly and combined with other factors such as tokenomics, market trends, and personal investment strategies, FDV helps investors have a more comprehensive and accurate view of the potential and risks of a project. With the above information, Coinmoi wishes you a successful investment.
Follow CoinMoi to update the hottest issues of the crypto market ok!!!
The article What is FDV? The Complete Guide to Fully Diluted Capital appeared first on CoinMoi .
