Stop looking at the FDMC

When to look at MC, when FDMC

Stop looking at the FDMC

Short story: you’re meant to look at Market Cap to derive value, and Fully Diluted Market Cap to derive how your investment into a discounted Fully Diluted Market Cap is going.

Long story:

Market Cap (MC) and the Fully Diluted Market Cap (FDMC), known sometimes as the Fully Diluted Valuation (FDV), are the two metrics that I think there's a general lack of clarity on across the entire industry, with the terms being used interchangeably between investors, projects, etc.

Whilst it’s not the end of the world, the fact that people look at the FDMC to understand the size of a project implies there is an inherent misunderstanding of the nuances between MC, FDMC, and FDV that need to be addressed.

What is market cap (MC)?

The market cap of a crypto token is similar to the market cap of stocks, which is defined as the total dollar/whatever market value of the company’s outstanding shares.

Outstanding shares are all the shares currently held by the shareholders and investors, and does not include treasury shares which is the company’s own holdings.

The crypto definition of market cap is similar, in that it is the total dollar/whatever market value of all the tokens currently circulating.

Circulating tokens are those which are available for trading by the general public, whereby tokens that are locked in smart contracts, legal contracts, staked in nodes, or already reserved for specific purposes (such as team allocations, private sales, bounties, marketing, etc.) are generally not considered part of the circulating supply.

What is fully diluted market cap (FDMC)?

The fully diluted market cap is the total value of the company’s shares, or the projects’ tokens, if the current market price is multiplied by the total number of shares / tokens.

What is fully diluted valuation (FDV)?

This is where it gets interesting.

The FDV is the same as the FDMC but before the token has hit the market - i.e. from the perspective of VCs, angels, and other investors (referred to as just ‘investors’ from now) who are investing in the pre-sale stages into whatever valuations.

Herein lies the nuance: some investors care about their pre-sale investment, whereas others, like retail investors, care about how much value the project has managed to accrue.

Let’s explore.

What is the purpose of MC and FDMC?

So, one common factor between these two values is the token price. MC is a derivative of price, and so is FDMC/FDV, but FDMC is an implication of valuation which is a derivative of price, whereas MC is an implication of actual current value which is a derivative of buy pressure.

You see, when investors invest, they value the company as a whole. So, investors that invested into a seed round with a $20M valuation would want to see the project at a higher FDMC once the token launches, regardless of how many tokens they can cash out or not.

“But, if valuation is a derivative of price, why not just look at price?” - you, probably.

Well, if I’m investing at a $20M valuation, the token price could be $0.0002 if the TTS is 100Bn, or it could be $20 if the TTS is 1M, so it’s easier to track valuations across my portfolio which will remain within a similar range unlike token prices that vary significantly.

Simply put, investors invest into an FDV, and compare their investment FDV to the current FDMC of the launched token.

But what’s the problem?

FDMC isn’t an accurate representation of value captured. In fact it’s pretty awful at that. Thus, any retail investors buying into a token because they think the project is super successful because of a huge FDMC are basing their due diligence on the wrong metric.

I can tell you a project has an FDMC of $500M and you might think that’s great. However, their market cap could be $500k, which all of a sudden puts the project on page 21 of CMC.

How? Because if their token price is $5, but they only have a 0.1% of tokens circulating right now, that is what the FDMC and MC will be.

So, putting together what we’ve learned, an investor that invested at a FDV of $300M (i.e. a token price of $3) is still looking at the FDMC of $500M and seeing a profit, but what’s important for the investor is the actual token price: the FDMC is just a better metric to showcase it.

However, a retail investor that’s investing into this project needs to understand that a MC of $500k is rather small. It’s around the same MC that better-choreographed memecoins get to before they rug.

It’s peanuts. Respectfully.

Whilst the investor is looking at FDV to find out how his investment is doing, the retail investor should be looking at the MC to see how much value the project has captured. If the MC is $500k, then maybe this is a gem that’s about to moon, or maybe it’s a project that’s in a narrative that nobody cares about on exchanges with no users.

Sorry, so, what is the problem exactly?

As the circulating supply grows, the buy pressure isn’t destined to grow with it.

If the buy pressure remains the same (e.g. the project doesn’t get new users) then as the tokens are unlocked and released into the market, two things will happen:

  1. the MC will remain the same, and

  2. the FDV will dwindle until it is the same value as the MC.

From $500M down to $500k.


There is a question of how reliable the MC calculations are - CoinMarketCap and CoinGecko often differ on the MCs because the circulating supplies are tracked differently, unbeknownst to us how (we tried hard to find out) beyond the project telling them the number.

As a result, people opt in for the undeniable FDMC.

But, even an imperfect MC is still a better metric for value captured than the FDMC.


Investors look at the FDMC because they invest into an FDV.

Retail investors, OTC investors, people trying to see how big a particular narrative is, researchers, and everyone else on the planet that wants to understand how big a project is should look at the MC, even if it’s not 100% accurate.