FDV vs Market Cap in Crypto: What’s the Difference and Why It Matters

When you’re evaluating a crypto token, you’ll often come across three key numbers: Volume, Market Cap, and FDV (Fully Diluted Valuation). Each of these tells a different story. 

Volume reflects current trading activity, Market Cap shows the present value of circulating supply, and FDV projects what the token could be worth if all tokens were released.

The problem is that while these terms get thrown around in crypto discussions, most investors only understand them on the surface. This blog will help you cut through the confusion. We’ll explain what Market Cap and FDV actually mean, how they differ, and why they matter more than just looking at Volume. 

Market Cap Explained

Market Cap, short for market capitalization, measures the current total value of a cryptocurrency in circulation. It gives traders a quick snapshot of how big or established a project is compared to others.

It is calculated as:
Market Cap = Current Price × Circulating Supply

For example, if a token is priced at ₹100 and there are 10 million tokens in circulation, the Market Cap would be ₹1,000,000,000.

• High Market Cap: Usually means the coin is considered more stable, less risky, and already well-established in the market (e.g., Bitcoin, Ethereum). However, it may not have the same explosive growth potential as smaller tokens.
• Low Market Cap: Indicates the project is relatively new or less established. It carries a higher risk but also, potentially, higher rewards if the project grows.

Market Cap is useful for quick comparisons. But remember, it only reflects circulating supply and ignores locked tokens, which can later enter the market and impact the token’s value.

FDV Explained

FDV, or Fully Diluted Valuation, expands the picture. It is calculated as:

FDV = Current Price × Total Supply

Instead of focusing only on coins currently in circulation, FDV projects what the value would be if all tokens were already in circulation. 

For example, let’s say a token is currently priced at ₹100.

• The circulating supply right now is 10 million tokens.
• But the total supply (including locked tokens that might be released later) is 50 million tokens.

If we calculate FDV, it would be equal to ₹5,000,000,000

This shows the maximum possible value of the token if all tokens were in circulation.

However, FDV also has a limitation: it assumes the token price will stay the same even after a much larger number of tokens enter the market. In reality, more supply could push the price down, so FDV can sometimes paint an overly optimistic picture.

ALSO READ: What does Fully Diluted Market Cap (FDV) mean in cryptocurrency?

The Role of Supply in Crypto

Both Market Cap and FDV are built on the concept of supply. Without knowing what “circulating supply” or “total supply” means, these terms won’t make sense.

Circulating supply refers to the number of coins already available in the market and being traded. Total supply is the complete number of coins that exist, including both circulating and locked tokens that may be released in the future. Some projects also define a max supply, which is the upper limit of coins that can ever exist.

Think of circulating supply as the coins already existing in the market that you can trade right now. Total supply, on the other hand, is like coins that are still locked in a box and will only be unlocked for trading at a later date. 

Since Market Cap is calculated using the coins in the market (circulating supply) and FDV uses both the market and the locked box (total supply), the two numbers can end up being very different. 

You can also see the relationship as a simple ratio:

FDV : Total Supply = Market Cap : Circulating Supply

This shows that FDV is like a scaled-up version of Market Cap, based on how many tokens could exist in the future.

Market Cap vs FDV: The Bigger Picture

While Market Cap and FDV are key indicators, they are best understood in relation to other metrics like Volume and Supply.

• Market Cap = Circulating Supply × Price → tells you the current size of the project.
• FDV = Total Supply × Price → shows the maximum potential size if all tokens were circulating.
• Volume → how much of the token is actually being traded daily, which indicates liquidity and demand.
• Supply (Circulating vs. Total) → shows how much is available today versus in the future.

Here’s a quick comparison:

Indicator	What it Shows	Limitation
Market Cap	Current project value based on circulating tokens	Doesn’t account for future supply
FDV	Future potential value if all tokens are unlocked	Assumes price stays the same
Trading Volume	Liquidity and demand strength	Can fluctuate daily
Supply (Circulating/Total)	How much is live now vs later	Doesn’t predict unlock timelines

What the Market Cap/FDV Ratio Means

The Market Cap to FDV ratio is a quick way to understand dilution risk:

• Higher Ratio (close to 1): Most tokens are already in circulation, meaning less dilution risk.
• Lower Ratio: A large portion of the supply is still locked, which may dilute current holders when released.

Example:

• Token A: Market Cap = $1B, FDV = $1.2B, which shows 83% supply already circulating, low dilution risk.
• Token B: Market Cap = $1B, FDV = $5B  shows only 20% supply circulating, heavy dilution possible.

So, two projects with the same Market Cap can have very different risk profiles depending on their FDV.

How to Read Market Cap and FDV Together

The smart way to evaluate a token is to use both numbers side by side. Here’s a simple flow:

1. Start with Market Cap to understand the coin’s present size.
2. Compare it with FDV to see how much bigger the number becomes if all tokens unlock.
3. If the gap is small, the dilution risk is low. If the gap is large, check the vesting schedule to know when and how tokens will be released.
4. Ask yourself whether the demand for the coin is strong enough to absorb the extra supply.

By following this, you avoid the trap of treating either metric in isolation.

Market Cap vs FDV: Key Differences

Aspect	Market Cap	FDV
Definition	Current value based on circulating supply	Future value if all tokens were released
Reflects	Today’s market reality	Maximum potential market value
Risk Factor	Lower risk, based on actual numbers	Higher risk if many tokens are still locked
Best For	Checking present valuation	Checking long-term dilution risk

Market Cap vs FDV vs Volume

Indicator	What It Measures	Why It Matters
Market Cap	Current Price × Circulating Supply	Snapshot of the token’s current market value. Shows how “big” it is today.
FDV (Fully Diluted Valuation)	Current Price × Total Supply	Long-term potential valuation. Reveals dilution risk from future unlocks.
Volume	Value of tokens traded in the last 24h (or chosen period)	Measures liquidity and demand. High volume = easier entry/exit, stronger price discovery.

Now, when you read all three together:

• A low Market Cap + high FDV + low Volume = risky bet (future dilution + poor liquidity).
• A reasonable Market Cap + balanced FDV + strong Volume = healthier project with better tradeability and more reliable growth prospects.

So why should you bother about the difference between these three? Because each metric alone can mislead you. 

Market Cap may look strong, but if FDV is many times higher, that signals upcoming dilution. A project could have both a healthy Market Cap and FDV, but if trading Volume is thin, you may struggle to enter or exit positions without moving the price. 

By reading all three together, you solve the problem of partial information and get a more reliable picture of both present value and future risk.

Token Unlocks and Dilution

FDV is linked to when and how locked tokens are released into the market. Projects often release tokens in batches according to a vesting schedule. Sometimes there’s a “cliff,” where no tokens unlock for months, and then a large batch is released. Other times, tokens unlock slowly every week or month in a linear fashion.

Both patterns matter because they affect sell pressure. A sudden cliff unlock can overwhelm demand and drop prices sharply. Even linear unlocks add a steady new supply, which can weigh on prices if user growth or adoption does not keep up. This is why simply knowing Market Cap is not enough; FDV and unlock schedules give a fuller picture.

Why the Gap Between Market Cap and FDV Matters

When you see a big gap between Market Cap and FDV, it tells you about risk.

• If the Market Cap is small but the FDV is very high, it means most tokens are still locked. When these tokens are released (called unlocking), the supply will increase, and the price of each token may fall. This creates future dilution risk.
• Market Cap is more reliable because it shows the value of tokens that are already in the market today. It is like checking how much money is actually moving, not just a future promise.
• FDV is still useful because it helps you imagine the long-term potential if all tokens are released. But it must be read with caution, just because FDV is large, it does not mean the project will reach it.

Limitations of FDV and Things to Watch Out For

While FDV gives a “big picture,” relying only on it can be misleading:

• Assumes Price Stays Constant- In reality, releasing more tokens often lowers the price.
• Ignores Demand- A project may have huge FDV but little trading volume.
• Tokenomics Matter- Unlock schedules, vesting, and distribution strategy change the real impact of supply release.
• Speculative Nature- High FDV projects can look attractive but may take years (or never) to reach full supply.

How to stay ahead: Always read FDV with Market Cap, Volume, and unlock schedules to avoid falling for inflated numbers.

Common Mistakes to Avoid

Many investors lose money because they read these numbers the wrong way. Here are the main traps:

• Believing low Market Cap = guaranteed growth

Just because a token looks “cheap” today does not mean it will surely rise. You must check the FDV and supply, too.

• Ignoring token unlock schedules

If a big batch of tokens unlocks soon, the price can fall quickly because supply jumps.

• Thinking FDV = guaranteed value

FDV is only a theoretical number. It shows what the coin could be worth if everything goes perfectly. Reality is often very different.

• Following hype only

Many people buy because of social media hype without checking the Market Cap and the FDV. This is like buying without knowing the real price of the shop item.

Conclusion

Understanding the difference between Market Cap and Fully Diluted Valuation (FDV) is crucial for navigating the crypto market with confidence. By weighing both figures together and avoiding common mistakes like ignoring token unlock schedules or chasing hype, you can make more balanced, informed decisions.

If you want to move beyond just numbers and start applying these insights to your own portfolio, the best next step is action. Download the Mudrex app today to explore, invest, and trade in crypto with smarter strategies backed by the right tools.