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.
Related token: $BNB Current price: 695.83 (24h +0.22%).
■ What does it mean?
“Low float, high FDV” means that only a small proportion of a token’s supply is in circulation when it launches, while its fully diluted valuation (FDV), based on the current price, is very high. FDV is the current price multiplied by the maximum supply. It represents the valuation assuming all tokens are in circulation.
The ratio of circulating market cap to FDV can give you a rough idea of how many tokens are still out of circulation: a ratio of 20% means about 80% of the tokens have yet to enter the market.
■ Binance Research report
In May 2024, Binance Research published a report specifically examining this phenomenon. It noted that some new tokens had a circulating supply of only 6% to 20% of their expected total supply.
The report argued that low circulation 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 closer attention to projects with a medium-sized market cap and a moderate initial circulating supply.
■ Why it’s worth paying attention
When the circulating supply is low, a small amount of capital can push prices up, inflating the valuation along with them. Once large quantities of tokens are unlocked later, much more capital is needed to absorb them. If demand doesn’t keep up, prices may 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 the tokens unlock. 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 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 coin’s circulating market cap only with that of older projects and conclude that it’s “cheap.” The picture may look completely different when you consider its FDV. New coins with very low initial circulation are often highly volatile, so keep your investment within an amount you can afford to lose entirely.
■ Summary
Low circulation isn’t necessarily bad, and a high FDV doesn’t mean a token is bound to fall. But looking at these two figures alongside the unlock schedule can help you avoid many misjudgments based on price alone. Knowledge can help you avoid pitfalls, but it can’t replace position management.
Anything I haven’t covered? Share it in the comments.