I’ve been asked this several times, so here’s one answer for everyone.
When a new token launches, its market cap may not look very high, yet people often warn that its “FDV is too high.” This reflects a phenomenon that was widely discussed in 2024: low float, high FDV. Understanding it can help you see the supply structure behind a new token’s price.
This report discussing “low float, high FDV” comes from Binance Research. $BNB is the native token of the Binance ecosystem. Current price: 749.9 (24h +1.06%).
What does it mean?
“Low float, high FDV” means that only a small proportion of a token’s supply is circulating when it launches, while its fully diluted valuation (FDV), based on its current price, is high. FDV is the current price multiplied by the maximum supply, representing the token’s valuation if all tokens were in circulation.
The ratio of circulating market cap to FDV can give you a rough idea of how many tokens are not yet in circulation: a ratio of 20% means around 80% of the tokens have yet to enter the market.
▍A Binance Research report
In May 2024, Binance Research published a report specifically analyzing this phenomenon. It noted that some new tokens had a circulating supply of only 6% to 20% of their projected total supply.
The report suggested that low circulating supply combined with a high FDV could lead to excessive selling pressure in the future, putting ordinary investors at a disadvantage. Binance later said it would pay more attention to projects of small and medium size with a moderate initial circulating supply.
▍Why it’s worth paying attention
When circulating supply is low, even a small amount of capital can push up the price, inflating the valuation as well. Once large amounts of tokens are unlocked later, much more capital will be needed to absorb them. If demand doesn’t keep up, the price could come under pressure.
Early investors and team members usually acquired their tokens at a much lower cost than the listing price, giving them more room to sell after tokens are unlocked. This is a result of the token’s supply structure, not a judgment about any particular project.
▍How to respond
When looking at a new token, first calculate the ratio of its circulating market cap to its FDV. Then check the unlock schedule for the coming year to see which months have large unlocks.
Don’t compare a new token’s circulating market cap with that of established projects and call it “cheap.” Looking at its FDV could lead to a very different conclusion. New tokens with very low initial circulating supply are often highly volatile, so limit your investment to an amount you can afford to lose entirely.
▍A final note
Low circulating supply isn’t necessarily a bad thing, and a high FDV doesn’t mean the price is bound to fall. But considering these two figures alongside the unlock schedule can help you avoid many misjudgments based solely on price. Verify information using multiple sources before acting, and don’t rely on just one person’s opinion.
Had you heard about this before?
Just sharing some notes. Make your own decisions when trading.