Why 'Fully Diluted Valuation' is a Scammer's Favorite Metric

Fully Diluted Valuation (FDV) presents a fantasy market cap based on tokens that don't exist. Scammers use it to create a false sense of scale and urgency, while the real float is often a tiny fraction.

• Illiquidity Trap: A $10B FDV with a $50M float means 95% of supply is locked, destined to dump on retail.
• Pump & Dump Fuel: High FDV creates narrative gravity for influencers to pump the small, tradable supply before unlocks.

There is no standard definition for 'circulating supply,' allowing teams to arbitrarily exclude tokens from the count. This directly manipulates the Market Cap/FDV ratio, the only honest valuation signal.

• Excluded Entities: Team, investor, foundation, and 'ecosystem' tokens are often omitted to paint a healthier picture.
• Metric Warfare: Compare CoinMarketCap's vs. CoinGecko's circulating numbers for the same asset—the discrepancy is the scam margin.

Scam launches front-load hype at Token Generation Event (TGE) with minimal circulating supply, guaranteeing a sell-off when large tranches unlock. This is a pre-meditated exit strategy disguised as vesting.

• VCs as Dumping Arms: Early investors with 12-18 month cliffs are not partners; they are timed explosives.
• Narrative Shift: By the time unlocks hit, the team has pivoted to 'building' the next narrative, abandoning the token.

Ignore FDV. The only metric that matters is Market Cap / Circulating Supply. Calculate circulating supply yourself by adding all unlocked, non-vested tokens. This reveals the true sell-side pressure.

• On-Chain Sleuthing: Use Nansen, Arkham, or Etherscan to trace vesting contracts and wallet balances.
• Demand Reality Check: Ask if current buy-side demand can absorb the next 6 months of unlocks. If not, it's a time bomb.

At its peak, AXS had a $40B+ FDV on a ~$10B circulating market cap. The core problem was the scheduled release of ~80% of the total supply to the team and investors over 4 years. This created a guaranteed, predictable sell wall that crushed the token price by over 95% from its ATH as inflation massively outpaced real demand.

• Problem: Tokenomics designed for extraction, not sustainable growth.
• Lesson: High FDV with low float signals future dilution, not current value.

The move-to-earn craze propelled GMT to a $25B FDV with a ~$2B circulating cap. The model required constant new user inflow to pay existing users, a textbook Ponzi. When growth stalled, the ~7% monthly token unlock schedule for the treasury and team turned from a footnote into a dominant market force, accelerating the death spiral.

• Problem: FDV masked the hyper-inflationary token emission schedule.
• Lesson: If the unlock schedule is the primary use case, the protocol is a pump-and-dump.

ARB launched with a $16B FDV, instantly making it a top 40 crypto. However, 87.5% of the supply was locked for the team, investors, and future airdrops. The market quickly priced in this massive overhang, causing the price to plummet ~90% from its initial post-airdrop high. The FDV created unrealistic expectations that the protocol's revenue could ever justify such a valuation.

• Problem: FDV priced in all future value, leaving no room for actual growth.
• Lesson: An L2 token with a higher FDV than its mainnet's native asset (ETH) is a fundamental mispricing.

The 2024 memecoin cycle perfected the FDV scam. Tokens like $WIF and $BONK would launch with a $10B+ FDV but a tiny circulating supply, creating the illusion of a major asset. Retail FOMO would pump the price, allowing insiders and VCs to exit their small, unlocked portions at insane valuations before the remaining 95%+ of supply inevitably crashed the market.

• Problem: FDV is used as a marketing number, completely divorced from liquidity or utility.
• Lesson: A high FDV/low float token is a volatility bomb designed to rug retail.

Compare the protocol's Fully Diluted Valuation against its real, locked economic activity (Total Value Locked). A ratio over 100x signals a token is a claim on future promises, not current utility.\n- Red Flag: FDV/TVL > 100 (e.g., many Layer 1s at launch)\n- Green Flag: FDV/TVL < 10 (e.g., established DeFi blue-chips like Aave, MakerDAO)

FDV obscures the supply tsunami. The real metric is circulating market cap and the unlock schedule for team, investors, and foundation tokens.\n- Problem: A $10B FDV with 5% circulating supply means $9.5B in sell pressure is queued.\n- Solution: Use TokenUnlocks.app or CoinMarketCap data. If major unlocks (>15% of supply) hit within 12 months, assume price will follow gravity.

FDV is a multiple of future earnings. Calculate the Price-to-Sales (P/S) ratio using protocol revenue (e.g., TokenTerminal data) and circulating market cap. Compare it to traditional tech (S&P 500 P/S ~2.5x).\n- Scam Math: $10B FDV, $1M annual revenue = P/S of 10,000.\n- Sane Math: Lido's P/S is ~15x; Ethereum's (as a staking asset) is ~50x. Anything over 500x is speculative vaporware.

Many projects (Celestia, EigenLayer) have useful products but tokens with no utility or cashflow rights. A high FDV for a 'governance' token is pure speculation.\n- Ask: Does the token capture fees, act as collateral, or provide essential compute? If not, its value is memetic.\n- Example: Uniswap's UNI has a ~$10B FDV but captures $0 in protocol fees, making its valuation entirely narrative-driven.