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Crypto Glossary/FDV (Fully Diluted Valuation)

FDV (Fully Diluted Valuation)

Get to know FDV (Fully Diluted Valuation) in crypto. Learn how to calculate it, understand its importance in investment strategies, and see real-world examples. A must-read for crypto investors.

TLDR - What is FDV?

In the realm of cryptocurrency, FDV, short for Fully Diluted Valuation, is a measure that captures the estimated worth of a cryptocurrency, considering not only its existing supply but also potential future tokens.

FDV is crucial because it paints a more realistic picture of a cryptocurrency's valuation by acknowledging all potential and future coins in existence.

To illustrate its importance, as of August 16, 2023, Bitcoin had a market cap of around $566 billion. But if we consider FDV, taking into account all Bitcoins that are ever going to exist (21 million), the fully diluted valuation was nearly $611 billion, reflecting Bitcoin's true potential value.


I. Grasping FDV (Fully Diluted Valuation)

FDV: An Overview 

Fully Diluted Valuation, or FDV, reveals the theoretical value of a cryptocurrency if all tokens were in circulation. It's a key evaluation tool in crypto investment, providing an in-depth assessment of a digital asset's market worth. The term

'FDV crypto' exemplifies this approach within the cryptocurrency landscape, playing crucial roles in risk assessment and investment strategies. 

Evolution of FDV in Crypto

FDV extends beyond calculating cryptocurrency's worth. It includes strategy formulation and future prediction, aiding investors with their long-term portfolio management. Integrating the current supply with fully diluted market cap, investors are able to ascertain an accurate valuation of an asset, thereby enhancing their decision-making process.

Step-by-Step Guide to Calculating FDV in Crypto

Calculating the Fully Diluted Valuation (FDV) in crypto involves a few straightforward steps. These steps primarily focus on the fundamentals of FDV, i.e., the upcoming total supply of a cryptocurrency, and its current trading price. 

For example, let's consider BNB Coin (BNB).

Step 1: 

Identify the total number of coins/tokens that will be in circulation in the future. This information is mostly available in the whitepaper or on the website of the crypto project under consideration. For BNB, this number is 200 million.

Step 2: 

Determine the current price of a single unit of the cryptocurrency. Referring to Coin360, a resourceful platform for accessing crypto price, BNB’s current price is $233.

Step 3: 

Multiply the total future supply by the current market price per token to arrive at the FDV. For BNB, the FDV is: $233 * 200,000,000 = $46,600,000,000 ($46.6 billion).

FDV (crypto) = Total Future Supply * Current Market Price

The outcome of these three steps gives the FDV or the potential market worth of BNB, given that all future tokens come into circulation.


II. Fully Diluted Market Cap vs. Market Cap

Understanding Market Cap and Fully Diluted Market Cap can assist investors in evaluating the relative size of a cryptocurrency and its potential future worth. 

Market Cap Explained

The 'Market Cap' quantifies the current total value of a cryptocurrency, calculated by multiplying its current market price with its circulating supply

Market Cap = Current Market Price * Circulating Supply

For instance, the cryptocurrency charts on Coin360 depict the Ethereum market cap as: $1,822.61 * 120,139,112.97 = $218,966,748,690 (nearly $219 billion).

Fully Diluted Market Cap Unveiled

'Fully Diluted Market Cap,' on the other hand, considers the total possible coins that will exist, projecting a cryptocurrency's potential worth.

Fully Diluted Market Cap = Current Market Price * Total Supply

Market Cap vs Fully Diluted Market Cap Comparison

Criteria Market Cap Fully Diluted Market Cap
Definition The existing value based on circulating supply. The potential value considering total possible supply.
Applications Assesses the present worth and liquidity. Eyes future worth, useful in spotting potentially underpriced tokens.
Limitations Doesn’t contemplate future growth. Inflation risk if all tokens come into circulation.

Grasping these concepts can aid investors in making informed decisions when navigating the dynamic cryptocurrency market.


III. Real-World Applications of FDV in Crypto

FDV's role in impacting crypto investment decisions is fascinating. It's a potent tool, influencing portfolio management and investment strategies.

Investment Strategies Using FDV

FDV isn't just for asset evaluation; it dictates investment decisions and guides portfolio diversification. Investors utilize FDV for risk assessment and growth potential prediction.

For example, an FDV lower than the market cap can indicate a potential for increase in crypto coin prices, making it an attractive investment option, while a higher one could signal an overvalued asset.

Portfolio managers, meanwhile, harness FDV to balance their portfolios by blending high-risk, high-return assets and their steady counterparts.

Case Studies and Success Stories

FDV's real-world implications become clear with case studies. Chainlink (LINK) in 2017 is an excellent example. With an FDV indicating tenfold growth, investors jumped aboard and witnessed LINK's market cap skyrocket past $1 billion by 2020. These victories confirm FDV's predictive ability in guiding profitable investments in the crypto sector.


IV. Pros and Cons of Using FDV in Crypto Analysis

Advantages of FDV Analysis

  • FDV presents a full snapshot of a cryptocurrency's potential worth.
  • It aids in identifying overvalued and undervalued cryptocurrencies.
  • FDV allows investors to visualize long-term value.

Potential Drawbacks of FDV Analysis

  • FDV is based on the assumption that all tokens are fully issued and trading at current rates which can lead to inaccuracies.
  • Token burning procedures can potentially inflate FDV.
  • FDV does not always offer accurate projections due to the volatile nature of the cryptocurrency market.

V. Conclusion

In conclusion, understanding Fully Diluted Valuation (FDV) is both an essential and transformative step for any savvy crypto investor.

The insights we’ve covered in this article, from the basic distinction between Market Cap and FDV to the practical examples of how FDV directly impacts investment decisions, have given you a solid foundation for crypto investment analysis. 

No longer will you navigate the crypto ocean without a compass. With the knowledge of FDV, you're equipped to account for future token issuance and its potential effects on value, becoming more adept in your investment strategies and unlocking the full potential of your crypto investments.


FAQs About FDV Crypto

1. What is FDV in crypto?

Fully Diluted Valuation (FDV) in cryptocurrencies estimates the potential worth of a crypto asset by considering the impact of all possible future coins issued. It combines the total future supply of a cryptocurrency with its current market price. 

2. What is FDV in tokenomics?

In tokenomics, FDV is a forecasting tool used to calculate the potential maximum market value of all digital tokens. It takes into account both the existing tokens and those that could potentially be minted or mined in the future.

3. Is fully diluted market cap good or bad?

A fully diluted market cap neither signifies something good nor bad, it simply provides a more comprehensive perspective on a cryptocurrency's potential worth, considering all possible future tokens. While it can reveal a potential for growth, it can also flag an asset as overvalued.

4. What is the fully diluted token value?

The fully diluted token value is the calculated price of a cryptocurrency if all future possible tokens were already in circulation. It serves as a theoretical representation of a crypto asset's maximum potential market value. 

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