When a new token launches, its market cap may not look 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.
Token mentioned in the article: $BNB at 691.47 (24h -8.67%).
■ What does it mean?
“Low float, high FDV” refers to a token having a very low percentage of its supply in circulation when it launches, while its fully diluted valuation (FDV), calculated at the current price, is very high. FDV equals the current price multiplied by the maximum supply, as if all tokens were already in circulation.
The ratio of market cap in circulation to FDV can give a rough idea of how many tokens have yet to enter circulation: a ratio of 20% means roughly 80% of the tokens have yet to enter the market.
■ 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 expected total supply.
The report suggested that low circulation combined with a high FDV could lead to excessive selling pressure in the future, which may be unfavorable for retail investors. Binance later also said it would pay closer attention to small- and medium-sized projects with a reasonable initial circulating supply ratio.
■ Why it’s worth paying attention
When the circulating supply is low, even a small amount of capital can push the price up, inflating the valuation along with it. Once large amounts of tokens are unlocked later, much more capital will be needed to absorb them; if demand can’t keep up, the price may come under pressure.
Early investors and the team typically acquired their tokens at a cost far below the listing price, giving them greater room to sell after tokens are unlocked. This is a result of the supply structure, not a conclusion about any particular project.
■ How to respond
When looking at a new token, first calculate the ratio of its market cap in circulation 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 market cap in circulation with that of established projects and call the new coin “cheap.” Looking at its FDV could lead to a completely different conclusion. New coins with very low initial circulation are often highly volatile, so limit your investment to an amount you can afford to lose entirely.
■ In closing
Low circulation isn’t necessarily bad, and a high FDV doesn’t necessarily mean the price will fall. But looking at these two figures alongside the unlock schedule can help you avoid many misjudgments based on price alone. Understanding the principles can help you make more informed decisions; it isn’t a way to predict price movements.
If you know someone who’s new to this, feel free to share this with them.
This is a personal perspective and may not be accurate, so please use your own judgment.