Why Is the Market Capitalization of a Token Often a Misleading Metric for Valuation?

Market capitalization (M x P) can be misleading because it is based on the current circulating supply (M) and the last traded price (P), which may not reflect the actual liquidity or the impact of selling a large position. Furthermore, it often ignores the fully diluted valuation (FDV), which includes all unvested and future tokens.

A low circulating supply can create a high market cap that drastically falls when vested tokens are released. FDV provides a more comprehensive view of the potential future supply and should be prioritized.