> Blog > What is a Fully Diluted Market Cap in Crypto?

Published July 14, 2022

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With over 18,000 different cryptocurrencies on the market, judging whether a project will stand the test of time can be a tough task. The cryptocurrency market is still in its development stage, and investors and analysts are constantly trying to figure out which metrics are important when judging a cryptocurrency project’s viability. One important but often overlooked metric that investors should take note of is the fully diluted market cap.

The fully diluted market cap is the total value of a given currency if 100% of its token supply was in circulation. This article will explore what the fully diluted market cap is, how it’s calculated, and whether or not it’s a good metric to use when assessing cryptocurrency projects.

Fully Diluted Market Cap vs. Market Cap in Crypto

To understand the fully diluted market cap, it’s important to first understand the regular market capitalization metric. Market capitalization is simply the total value of all the currency currently in circulation. It’s calculated by multiplying the current price of a coin by the number of coins in circulation.

Market_cap = circulating_supply * token_price

For example, let’s say that there are 10 million ABC coins in circulation and each coin is currently worth $100. The market cap would be $1 billion.

Market_cap = 10 million * $100

Market_cap = $1 billion

By contrast, the fully diluted market cap takes into account all the coins that could potentially be in circulation. This includes things like unsold tokens from an ICO, locked up tokens, and so on.

How to Calculate Fully Diluted Market Cap Crypto

To calculate the fully diluted market cap, just multiply the total supply of a particular coin by its current price.

Fully_diluted_market_cap = total_supply * token_price

For example, let’s say that the same ABC project from before has a total supply of 20 million coins. Of those 20 million, 10 million are in circulation and 10 million are locked up. The fully diluted market cap would be $2 billion.

Fully_diluted_market_cap = 20 million * $100

Fully_diluted_market_cap = $2 billion

It’s important to note that the total supply used in the calculation should include all the coins that could potentially be in circulation. 

In the case of bitcoin, this would mean including all the coins that will ever be mined, which is 21 million. With that information, it’s easy to find bitcoin’s fully diluted market cap, by simply multiplying the current price of BTC by 21 million. 

Implications of a Fully Diluted Market Cap

A project’s fully diluted market cap is a good indicator of a project’s viability, but it doesn’t tell the whole story. If a project has a large fully diluted market cap, it could indicate that the currency has achieved a high degree of adoption and is, therefore, more likely to be around for the long haul, but it’s important to keep in mind that this is not a comprehensive metric.

A high discrepancy between a token’s market cap and a fully diluted market cap does not always have to imply that it has a high amount of adoption. Some projects launch with a large number of tokens still locked up, meaning that over time, these tokens could be sold off as the project ages, placing high amounts of selling pressure on the token. 

This means that high fully diluted market caps could be either a positive or a negative for a project, so it is very important to do your own research on a coin’s tokenomics and supply schedule to better understand the dynamics behind these numbers and the long-term viability of a project.

To really gauge how many people are using a particular currency, it’s much more useful to see how many active wallets are storing the coin in question. You can find this information on a token’s respective block explorer, such as Ethereum’s Etherscan, Solana’s Solscan, and others.

A coin’s fully diluted market cap might help you assess a project’s risk and viability, but it can’t be the only thing you look at. A project with a large fully diluted market cap is generally considered to be less risky than a project with a small fully diluted market cap. Again though, this is not a comprehensive metric, and there are other factors to consider when assessing risk. 

Navigating a Fully Diluted Market 

The fully diluted market cap can be a helpful metric to use when assessing cryptocurrency projects, but it’s always a good idea to dive deeper than the numbers when researching a project in which you’d like to invest. Aim to understand a token’s fundamental value proposition and the reasons behind the numbers showing up in the data.

Stepping away from the data, other metrics like a project’s social engagement and online community are important factors to consider before investing. It’s also a good idea to read a project’s whitepaper to get a full view of a project’s tokenomics and the creator’s vision for its future. 

With a little bit of research, you’ll be well on your way to making better-informed decisions about your next crypto investment.

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