For educational purposes only; not investment advice. Investing may result in loss.
Direct answer
Circulating market capitalization and FDV are the two most commonly used and most confusing indicators in the valuation of crypto projects. This entry explains how to calculate the two, why a low unit price does not mean a token is cheap, and why low-circulation projects may face subsequent unlocking pressure.
Both circulating market capitalization and fully diluted valuation (FDV) use “price multiplied by quantity” to describe token valuation, but they answer different questions: the former describes the scale of currently tradable tokens at current prices, and the latter describes the theoretical scale when all potential supply is priced at current prices. Confusing the two, it is easiest to overestimate the “cheapness” of low-circulation, high-unlock items.
The basic formula for circulating market capitalization is:
Circulating market capitalization = current price × circulating supply
If the price of a token is US$2, and 100 million coins have entered the market, the circulating market value is US$200 million. “Circulation” here is not a synonym for “already minted”. Team lockups, foundation reserves, and shares that have not yet been attributed to investors may not be included in the circulation by the data platform even if they already exist at addresses on the chain.
The common formula for FDV is:
FDV = current price × maximum supply
If the protocol does not specify a hard maximum supply, a data platform may use total supply or another documented fully diluted supply convention, so you must confirm the methodology when reading. Continuing with the above example, if the maximum supply is 1 billion coins, FDV is $2 billion. It is not a prediction of future market value, nor does it mean that the market will definitely invest $2 billion in funds in the future. It is a static number assuming that all tokens are priced at the current marginal price.
- FDV
- $1,250m
- Circulating share
- 40%
Outputs are educational approximations. They exclude venue rules, taxes, latency, oracle behavior, and other protocol-specific parameters unless shown.
How it works
The transaction price is determined by a small portion of the recent transactions in the market, and the market capitalization extrapolates this marginal price to the entire corresponding supply. The final transaction price of a certain token is US$2, which does not mean that you can still get US$200 million by selling all 100 million coins; when the depth of the order book or automatic market-making pool is insufficient, large sales will continue to drive down the transaction price. Therefore, circulating market capitalization and FDV are both valuation yardsticks, not cash in a project’s coffers, nor amounts that can be cashed out immediately.
Circulating market capitalization is closer to the tradable supply that the market actually needs to absorb. It is suitable for comparing current size, index weighting and short-term supply and demand, but is also affected by statistical errors in circulating-supply estimates. When a large number of tokens are concentrated in a few addresses, the market-making quota is small, or the tokens are nominally circulating but do not move for a long time, a large circulating market capitalization still does not mean sufficient liquidity.
FDV incorporates tokens that may be released in the future into the same price framework to facilitate comparison of projects at different issuance stages. It is particularly suitable for observing the starting point of valuation when new coins are issued, but ignores time value, future demand, destruction, issuance and price changes. Tokens that will be unlocked five years later cannot be mechanically considered to be sold today, and conversely, they cannot be completely dismissed just because they are not yet in circulation.
Example
Assume that Project A has a maximum supply of 1 billion coins, and only 80 million coins are in circulation at the time of listing, with a price of $1.5. Its float market cap is $120 million, its FDV is $1.5 billion, and its float ratio is 8%. Just looking at the circulating market value, it looks like a small and medium-sized project; based on FDV comparison, it may be close to the valuation of a mature project.
Six months later, the team, investors and ecological incentives have unlocked a total of 120 million coins, and the circulation has increased from 80 million to 200 million, an increase of 150%. If the price remained at $1.50, the float would rise to $300 million, but this would require the market to absorb more supply at the same price. If demand and liquidity do not increase simultaneously, the price may adjust; the extent of the adjustment cannot be derived solely from the unlocked quantity, because whether the holder sells, the depth of market making, and market sentiment will all affect the results.
Look at project B again: the price is $15, 20 million pieces are in circulation, and the maximum supply is 25 million pieces. It has a float market cap of $300 million, an FDV of $375 million, and a float ratio of 80%. Although the unit price is ten times that of A, the remaining room for dilution is significantly smaller. It can be seen that “the currency price is low so it is cheaper” is meaningless. Supply, valuation and business adoption must be compared at the same time.
Risks
Assuming that the FDV of Protocol C is US$3 billion and the circulating market value is US$600 million, there seems to be a 5-fold gap. However, the uncirculated portion will be released month by month within four years, with only 12% of the current circulating volume added in the first twelve months; the agreement has continued fee income and user growth during the same period. The key question here is not “if FDV is high, we cannot watch it”, but whether growth can match supply release in time.
On the contrary, the circulating market value of Protocol D is US$400 million and FDV is US$800 million. The difference is only twice. However, an investor share equivalent to 35% of the existing circulating supply will be unlocked at one time next month, and the early cost is much lower than the market price. D’s short-term supply events are likely to be more concentrated than C’s. This comparison illustrates that the FDV ratio is the filter and the unlocking schedule is the entry point for further analysis.
The valuation should also be combined with usage data of similar protocols. For example, when comparing two trading protocols, you can observe trading volume, fees, active users, treasury assets, token rights, and competitive landscape. Just because a project has a low FDV does not mean it is undervalued; if the token has no fee allocation and limited governance impact, a low valuation may also reflect weak value acceptance.
When researching, at least distinguish the maximum supply, total supply, circulating supply and freely tradable quantity. When a hard cap exists, maximum supply is the highest supply permitted by the current protocol rules; it may be undefined for an uncapped asset. Total supply generally means minted tokens minus burned tokens, while circulating supply is a provider’s estimate that excludes lockups and internal allocations under its methodology. The truly freely tradable amount may be smaller than the statistical value. Different platforms do not always handle team addresses, ecological funds, and staked tokens consistently.
Then look at the unlock calendar instead of just looking at an overall ratio. A linear release of 1% every month and a one-time release of 15% on a certain day will put completely different pressure on the market. Also identify recipients: community incentives may be dispersed to a large number of users, investor allocations may be concentrated among a small number of low-cost holders, and foundation unlocks may be used for grants, market making, or operations. The same quantity corresponds to different selling motivations.
Finally, compare new supply and real trading capacity. If a token worth US$50 million will be unlocked in the next 30 days, but the normal daily spot trading volume of the coin is only US$8 million and the buying depth is even lower, the scale of the unlocking is worth tracking. The trading volume will be repeatedly counted as it changes hands, and a trading volume of US$8 million cannot be understood to mean that there must be US$8 million in new funds every day.
The first step is to record the price, circulation volume, total volume and maximum volume at the same time point, and indicate the data source. The second step is to calculate the circulation rate and list the proportion of new circulation in the next 30 days, 90 days and one year to the current circulation. The third step is to put the recipient cost, unlocking method, transaction depth and protocol growth into a table. This avoids cutting off just the most advantageous single number.
Scenario analysis should also be done. Assuming that the circulation volume increases by 50% in the next year, calculate the circulating market value when the price remains unchanged, decreases by 30%, and increases by 30%. Rather than predicting prices, this exercise reveals that “market capitalization growth” may come from increased supply alone. If the price drops by 30% but the circulation increases by 50%, the circulation market value will still increase by 5%, but the news headlines may conceal the actual losses of holders.
The explanatory power of FDV is weaker for tokens that do not have hard caps or governance issuance. Need to read about minting permissions, inflation parameters, governance thresholds and burning mechanisms. If the protocol can increase the upper limit through governance, the maximum supply displayed on the page is only the current rule, not a permanent guarantee.
Valuation records must also be timestamped. The price may change within a few minutes, but the circulation platform is updated on a daily basis. Putting the morning price together with the previous day’s supply will cause caliber misalignment. When encountering token migration, cross-chain mapping or large-scale destruction, first confirm whether the data platform has been updated. Comparing two projects should also try to use the same time period, the same price source and the same supply definition, otherwise what appear to be precise multiples may just be statistical differences.
Common misconceptions
Myth 1: Low unit price means low valuation
If 100 billion tokens of US$0.01 are supplied, FDV can still reach US$1 billion. Splitting the number of tokens can lower the unit price but does not automatically change the overall valuation.
Myth 2: FDV is the market value that will definitely be reached in the future
FDV uses today’s marginal price multiplied by future supply, where future prices, supply rules, and demand will all change. It is a comparison tool, not a price target or fund flow forecast.
Myth 3: All unlocks will be sold immediately
Unlocking only means that it will become disposable, but it does not mean that it will be sold. Receivers, costs, lock-up arrangements, OTC transactions and market acceptance will all affect the results, but “not necessarily selling” is not a reason to ignore unlocking.
Myth 4: The circulating market value is equal to the funds obtained by the project
Project financing amount, treasury balance and token market value are different concepts. Market value comes from marginal price extrapolation and cannot be fully realized at the listed price.
Related topics
Sources
- ERC-20 Token Standard - Ethereum.org (accessed: 2026-08-21)
- Fully Diluted Valuation - CoinGecko (accessed: 2026-08-21)
- CoinGecko Supply Methodology - CoinGecko (accessed: 2026-08-21)
- Supply (Circulating, Total, Max) - CoinMarketCap (accessed: 2026-08-21)
- Use Caution When Buying Digital Coins or Tokens - CFTC (accessed: 2026-08-21)