Why Is a High FDV Compared to Market Cap a Potential Warning Sign?
A high Fully Diluted Valuation (FDV) relative to the current Market Cap indicates that a significant number of tokens are not yet in circulation. These unreleased tokens represent a massive potential supply increase in the future, often due to vesting schedules for founders or early investors.
When these tokens are released, they can be sold, creating substantial selling pressure that depresses the price.
Glossar
Market Cap
Capitalization ⎊ The market capitalization, often abbreviated as market cap, represents the total dollar market value of a cryptocurrency, options contract, or financial derivative.
FDV
Valuation ⎊ Fully Diluted Valuation (FDV) represents the theoretical market capitalization of a cryptocurrency project if all tokens were currently in circulation.
Cap
Strike ⎊ Cap, within cryptocurrency derivatives, denotes the predetermined price level at which an option contract ⎊ typically a call or put ⎊ may be exercised.
Fully Diluted Valuation (FDV)
Valuation ⎊ Fully Diluted Valuation (FDV) represents the theoretical market capitalization of a cryptocurrency if all future tokens were currently in circulation.