When a coin has a low circulating market cap, it’s easy to think it’s still in its early stages and has plenty of room to rise. But if its fully diluted valuation, or FDV, is already high, I’d hold off on calling it “cheap.” The fact that only a small number of coins are on the market right now doesn’t mean the market will only have to absorb that many in the future.

Market cap is the price per coin multiplied by the circulating supply. FDV multiplies that same price by the full supply being used. When reviewing the figures, check whether the page uses the total supply or the maximum supply; don’t compare figures based on different definitions directly. FDV shows what the valuation would be if more of the supply were priced at the current price—it doesn’t mean the project will definitely be worth that much in the future.

Here’s a purely hypothetical example: a coin is worth $1 each, with 100 million coins in circulation and a total and maximum supply of 1 billion. That means its circulating market cap is $100 million and its FDV is $1 billion. The figures differ tenfold because the circulating supply is only one-tenth of the full supply—not because the coin has been proven to have tenfold upside.

What really makes me cautious is when the price is based on a relatively small circulating supply, while a large amount of additional supply may gradually enter circulation. If you focus only on the $100 million figure and compare it with a project where most of its coins are already circulating, it’s easy to underestimate the pressure from a growing supply.

However, a large gap doesn’t mean the next unlock will definitely trigger a crash. Uncirculated coins may be released over several years, holders may not sell right away, and new demand may absorb some of the supply. FDV is neither a forecast of the future price nor a guarantee that the price will fall. It’s a reminder to look more closely at supply, not a substitute for making your own judgment.

I’d first look at how many coins will be released during the period I plan to hold. Suppose 100 million coins are currently circulating, and another 20 million are scheduled to be released soon. That’s 20% of the current circulating supply. This figure helps put the scale of the additional supply in perspective better than saying it’s “only 2% of the total supply”—but it still doesn’t mean the price will fall by 20%.

It’s also important to know who will receive these coins and when they can transfer them. Team and early investor unlocks may have different selling incentives from ecosystem reward distributions, and recipients may have acquired their tokens at different costs. Check the project’s allocation details, unlock schedule, and actual implementation. An announcement that tokens will be unlocked doesn’t mean they’ve all entered the market, let alone that they’ve all been sold.

Beyond supply, there’s another question to ask: where will new demand come from? People using a product doesn’t necessarily mean they need to keep buying or holding its coin. If the plans for additional supply are clear but demand rests only on the hope that “the project will take off,” I’d be more cautious and wait for evidence explaining the demand for the token, rather than defending it because its circulating market cap is small.

If you can’t even verify how circulating supply is calculated, how many coins will be released soon, or the arrangements for holders, you don’t have enough information to treat it as an undervalued asset. For beginners, sitting it out is safer than betting on an optimistic outcome when key information is missing.

The next time you see a low circulating market cap alongside a high FDV, first ask why the two figures differ so much. Then look at how much supply will increase during your holding period and whether there’s genuine demand to absorb it. Only when you consider both sides does a “small market cap” become meaningful.