Many people entering crypto are told that a low-priced token could reach Bitcoin’s price, sometimes almost overnight. Without understanding how valuations work, such claims can sound believable. A token trading for a fraction of a cent may appear cheap, but its supply can make even a $1 price mathematically unrealistic.

This is why understanding market capitalization and fully diluted market capitalization is so important. In this guide, we explain Market Cap vs. Fully Diluted Market Cap, how both are calculated, and what they reveal about a crypto project’s valuation.

 

What is Market Cap in Crypto

Market capitalization, or market cap, represents the combined market value of all coins or tokens currently in circulation. The concept comes from traditional markets, where it measures the value of a company’s outstanding shares.

In crypto, market cap gives traders, investors, and institutions a consistent way to assess the current size of a cryptocurrency. Instead of relying on someone’s opinion about what a project is worth, it uses two publicly available figures: the asset’s current price and its circulating supply.

The price reflects what buyers and sellers currently agree to pay for one unit, while circulating supply shows how many coins or tokens are available in the market. Together, these figures provide the implied value of the circulating supply.

People commonly use market cap as a valuation for the associated blockchain. Technically, however, it measures the market value of its native cryptocurrency rather than the blockchain or company itself.

How to Calculate Market Cap

Calculating market cap is straightforward. For a company, multiply the number of outstanding shares by the price of a single share. This gives you the company’s market capitalization.

The same calculation applies to cryptocurrencies. Instead of outstanding shares, multiply the number of coins or tokens currently in circulation by the price of one coin or token.

While discussing market cap, it is worth addressing a common sales pitch used to attract new crypto investors. It appears most frequently with meme coins, where promoters point to the number of zeros in a token’s price and say, “If it reaches Bitcoin’s price, your $10 investment could be worth millions”.

Shiba Inu Example

The easiest way to test such a claim is to calculate the market cap the cryptocurrency would require at the promised price.

Consider Shiba Inu. CoinGecko currently displays its price as $0.0₅4211. SHIB has approximately 589.243 trillion tokens in circulation and a total supply of 589.5 trillion. Its current market cap is around $2.48 billion.

If SHIB reached $1 while its circulating supply remained unchanged, its market cap would be:

For perspective, that would be more than 450 times Bitcoin’s current $1.30 trillion market cap and around 258 times the entire $2.28 trillion crypto market.

A $10 investment would mathematically become worth millions at $1, but the required valuation makes the claim highly unrealistic under the present supply. Token burns can reduce that supply, but SHIB would need an extraordinary reduction before a $1 target could fit within a realistic market valuation.

 

What is Fully Diluted Market Cap in Crypto

Fully diluted market capitalization, more commonly called fully diluted valuation or FDV, estimates what a cryptocurrency would be worth if its entire supply were circulating at the current market price.

Market cap only counts coins and tokens already in circulation. FDV also accounts for supply reserved for investors, team members, ecosystem rewards, treasury allocations, and future issuance.

The formula is:

A large difference between market cap and FDV usually means that only a small portion of the project’s supply is circulating. This is commonly known as a low-float, high-FDV structure.

Starknet Launch Example

Starknet provides a useful example. When STRK entered circulation on February 20, 2024, approximately 728 million tokens were distributed to around 1.3 million addresses. However, Starknet initially created 10 billion STRK, leaving most of the supply outside circulation.

Within hours, STRK had a market cap of nearly $1.6 billion and an FDV of $20.1 billion. Its fully diluted valuation was therefore more than 12 times its circulating market cap. Unchained reported these figures shortly after trading began.

The $20.1 billion FDV did not mean investors had placed that amount into STRK. It showed the valuation implied if all 10 billion tokens carried the same market price. Buyers therefore had to consider whether the project justified that valuation before more STRK entered circulation.

FDV is not a prediction of the project’s future market cap. The token price may change considerably as its circulating supply expands.

 

Market Cap vs. FDV

Market cap shows the current value assigned to the circulating supply, while FDV applies the current price to the project’s entire supply.

Factor	Market Cap	Fully Diluted Valuation
Supply Used	Circulating supply	Total or maximum supply
Formula	Price × circulating supply	Price × total or maximum supply
What It Shows	Current circulating valuation	Implied total valuation
Primary Use	Comparing current asset size	Assessing future supply pressure
Main Limitation	Ignores noncirculating tokens	Assumes the price remains unchanged

Neither metric should be viewed alone. Market cap may make a project appear smaller because most of its tokens are not yet circulating. FDV can make it appear much larger by assuming every token could maintain the current price.

You can measure the gap using the market cap-to-FDV ratio:

A ratio close to 1 indicates that most of the recorded supply is already circulating. A ratio of 0.10 means the current market cap represents roughly 10% of the fully diluted valuation. In that case, the project’s supply schedule and token allocations require closer attention.

 

How Token Releases Affect Valuation

Crypto projects often reserve tokens for founders, investors, rewards, grants, and treasury spending. As these tokens become tradable, circulating supply increases. If demand does not keep pace, the additional supply may create selling pressure and reduce the token’s price.

A vesting release makes existing tokens tradable without necessarily increasing total supply. New issuance increases total supply, while token burns reduce it. However, neither releases nor burns guarantee a specific price movement because demand remains equally important.

 

What These Metrics Cannot Tell You

Market cap and FDV provide valuation context, but they do not show whether a cryptocurrency is fairly priced.

• Money invested: Market cap applies the latest price across the circulating supply.
• Liquidity: Tokens with similar valuations can have very different trading depth.
• Project fundamentals: Neither measures revenue, adoption, security, utility, or development activity.
• Selling pressure: FDV does not show when reserved tokens will enter circulation or whether recipients will sell.
• Future price: FDV assumes the entire supply carries today’s price.

These metrics should be considered alongside liquidity, token distribution, supply schedules, network usage, and demand.

 

Bottom Line

If market cap and FDV previously looked like two labels for the same figure, the confusion is understandable. Crypto platforms often display both without explaining which supply is being valued. Knowing that difference helps you question unrealistic price targets and high-FDV launches.

If you want to learn more about crypto and traditional finance, read our guide to crypto loans, where we explain how crypto loans work and how they differ from traditional loans.

 

FAQs

1. Does a Low Price Mean Cheap?

No. A cryptocurrency with a very low unit price can still carry a large market cap if trillions of tokens are circulating. Market cap and FDV provide more context than the number of zeros in the price.

 

2. Is a High FDV Bad?

Not automatically. A high FDV becomes more concerning when it is far above the current market cap and large allocations are scheduled to enter circulation. The project’s adoption, demand, and distribution schedule should also be considered.

 

3. Can Market Cap Be Higher Than FDV?

Under normal conditions, market cap should not exceed FDV because circulating supply cannot exceed total supply. It may temporarily appear higher because of inaccurate supply reporting, delayed data updates, or different calculation methods.

 

4. Do Token Burns Reduce Market Cap?

Burning circulating tokens reduces the supply used in the market-cap calculation. However, the final market cap also depends on how the market price reacts. Burning noncirculating tokens may reduce FDV without immediately changing market cap.

 

5. Is FDV More Important Than Market Cap?

Neither is more important in every situation. Market cap shows the valuation of the supply currently circulating, while FDV highlights how the valuation looks after accounting for the remaining supply. Reading both together provides better context.