TL;DR

Market cap is the current token price multiplied by the circulating supply: what the market values tradeable tokens at right now. Fully diluted valuation (FDV) is the price multiplied by the total supply, including locked, vesting, and unreleased tokens. The gap between market cap and FDV reveals how much future sell pressure exists from tokens that haven’t hit the market yet.

How It Works

Think of market cap and FDV as two lenses on the same token. Market cap tells you what the market is actually pricing today. FDV tells you what the market would be pricing if every token that will ever exist were already in circulation.

The math is simple. If your token price is $0.10 and 50 million tokens are circulating, the market cap is $5 million. If the total supply is 1 billion tokens, the FDV is $100 million. Same price, but dramatically different valuations depending on which denominator you use.

The gap between these two numbers matters because it represents future dilution. Those 950 million non-circulating tokens will eventually enter the market through vesting schedules, staking rewards, ecosystem grants, and other emission mechanisms. When they do, they create selling pressure: holders of unlocking tokens often sell some or all of them. If demand doesn’t grow proportionally, the price declines.

For token launches, the initial circulating supply determines how the market perceives your token. Launch too little supply (say 2%) and you get an artificially high market cap with a stratospheric FDV that scares away sophisticated investors. Launch too much (say 50%) and you may flood the market with more supply than demand can absorb.

A subtle but important point: market cap calculated from AMM pool prices can be misleading for small pools. The “price” is just the reserve ratio in the pool. If the pool is shallow, a single large trade could dramatically change that price. The market cap number is only meaningful if there’s enough liquidity to actually support trades at that price level.

Try It Yourself

Watch how the founder buy changes market cap: the Token Launch Simulator shows initial market cap (from the pool creation) and final market cap (after the founder buy). With a 1 billion token supply, you can immediately see the FDV at any price point. Try the Token Launch Simulator →

Related Concepts

• Total Supply: The denominator in the FDV calculation: price times total supply
• Spot Price: The current price used to calculate both market cap and FDV
• Token Generation Event: When circulating supply is first established and market cap becomes real
• Supply Ownership: How much of the total supply the team controls, which affects the market cap / FDV gap
• TGE Capital Allocation: The budget decisions that determine initial pool price and therefore market cap

Frequently Asked Questions

What is the difference between market cap and FDV?

Market cap equals price times circulating supply: the tokens currently available for trading. FDV (fully diluted valuation) is the price times total supply, covering every token that will ever exist, including those still locked or vesting. A token with a $5M market cap but $100M FDV has 95% of its supply yet to enter the market, which represents potential future selling pressure.

Why is FDV important for token launches?

FDV reveals the implicit valuation of the entire token supply at today’s price. If a token launches at $0.10 with 5% circulating supply and 1B total supply, the FDV is $100M even though the market cap is only $5M. Sophisticated investors compare this FDV against the project’s realistic potential. If the FDV looks overvalued, they expect the price to decline as more supply unlocks.

What is a healthy ratio between market cap and FDV at launch?

There is no universal rule, but many successful launches in recent years have targeted 5-15% of total supply circulating at TGE. This means the FDV is roughly 7-20x the market cap. Too little circulating supply (under 3%) creates artificial scarcity concerns and thin liquidity. Too much (over 30%) can indicate weak vesting and insufficient alignment between insiders and the market.

Does the Token Launch Simulator show market cap and FDV?

Yes. The calculator shows both the initial market cap (based on the starting pool price and your configured total supply) and how the market cap changes after the founder buy and subsequent trading. Since the simulator uses total supply as an input, you can derive FDV from any price point by multiplying price times total supply.

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