Fully Diluted Value (FDV)

Fully Diluted Value (FDV) definition: The total theoretical market capitalization of a cryptocurrency project, based on all tokens, not just those in circulation.

At its essence, Fully Diluted Value (FDV) gauges the valuation of a cryptocurrency by considering its maximum potential supply - that is, accounting for all tokens that could potentially exist, even if they are not currently in circulation.

Just as the market capitalization of a cryptocurrency provides an immediate snapshot of its present value based on circulating supply, the FDV projects a broader picture. It includes all tokens: those available for trade, those held in reserves, and even those that might be released in the future due to protocols or agreements set within the project.

To calculate the FDV, one simply multiplies the current price of the cryptocurrency by its maximum possible token supply. This offers potential investors and stakeholders a holistic understanding of what the market valuation would be if all tokens were in circulation.

Two vital elements underscore the importance of FDV. First, the value serves as a theoretical cap on a project’s market capitalization. Second, it informs investors about the project's future token release plans, thus giving them insights into potential price pressures or dilution effects.

For instance, if a cryptocurrency's current market capitalization is significantly lower than its FDV, it might indicate that a considerable portion of its tokens hasn't been released. This could be due to a range of reasons such as future release schedules, staking requirements, or team allocations. A discerning investor, upon recognizing this gap, would then delve deeper to understand the reasons behind it, as well as the potential impact on the token's price once these tokens enter the market.

In the ever-evolving cryptocurrency space, where new tokens and projects regularly emerge, understanding metrics like FDV becomes indispensable. It aids in evaluating not just the present state of a crypto asset, but also its future prospects and potential risks. As with all financial metrics, the FDV should be considered alongside other indicators and not in isolation to ensure comprehensive project analysis.

In short, the Fully Diluted Value (FDV) is a key measure in cryptocurrency evaluations, showing a project's future worth and possible token amounts. As the crypto world grows, tools like FDV are integral in assisting both novice and seasoned investors in making informed decisions.

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Michelle Legge
By Michelle LeggeHead of Crypto Tax Education
Updated Nov 9, 2023
This article has been fact checked and reviewed as per our editorial policy.