Tokenomics: Market Cap, FDV, Supply and Unlocks
Market cap, FDV, circulating supply, unlocks: learn to read a crypto's tokenomics and spot upcoming dilution.
The essentials
What is tokenomics?
The word comes from "token" and "economics." It covers everything that determines a crypto asset's supply and its distribution:
- the number of units that exist today and that will exist tomorrow;
- the split between the team, investors, the community and the treasury;
- the schedule on which locked units are released;
- the mechanisms that create (issuance) or destroy (burn) units.
A crypto's price, taken on its own, says almost nothing. A token at $0.01 is not "cheaper" than a token at $100: it all depends on the number of units involved. That is where supply indicators come in.
The three types of supply
The word supply refers to the number of units. Aggregators like CoinMarketCap and CoinGecko distinguish three kinds.
Circulating supply
CoinMarketCap defines it as the best approximation of the number of units circulating on the market and in the public's hands. Excluded from it, among other things: units locked in smart contracts, team and private investor allocations, ecosystem or marketing reserves, and foundation or treasury holdings. CoinMarketCap compares this figure to a stock's "float" on the stock market.
Total supply
This is the number of units that already exist, minus those that have been verifiably destroyed ("burned"). It includes both locked and unlocked units.
Max supply
This is the maximum number of units that will ever exist, minus those burned. Some assets have a fixed cap, others don't:
- Bitcoin: according to the Bitcoin.org FAQ, issuance decreases automatically until it stops at 21 million bitcoins.
- Ethereum: ethereum.org describes a dynamic supply, with no fixed cap. New ETH is issued to reward validators, and part of the transaction fees has been burned since EIP-1559. Depending on the balance between the two, supply rises or falls.
Market cap: market capitalization
Market cap (market capitalization) is calculated as follows, according to CoinGecko:
Market cap = circulating supply × current price
It is used to compare the size of projects against each other. But CoinGecko points out several important limits:
- it measures neither the quality of the technology nor real adoption;
- it says nothing about liquidity, meaning how easy it is to buy or sell without moving the price;
- it doesn't show concentration: a large part of the supply can be held by a few addresses;
- it is not the sum of money invested in the project: it is only the last traded price multiplied by the circulating supply.
That last point is essential. On a thinly traded token, a few transactions are enough to push the price up, and therefore the displayed market cap, without any equivalent capital having been invested.
FDV: fully diluted valuation
FDV (Fully Diluted Valuation) answers the question: "what would the project be worth if all the planned units were in circulation, at the current price?" CoinGecko calls it a "theoretical" market cap.
Note that the two major aggregators don't calculate it in exactly the same way:
| Aggregator | FDV formula |
|---|---|
| CoinMarketCap | Max supply × price |
| CoinGecko | Total supply × price |
For the same token, the two sites can therefore display a different FDV. CoinGecko also notes that some cryptos have no FDV displayed, for lack of a defined maximum supply.
Finally, CoinGecko stresses that FDV rests on a strong assumption: that the price stays the same while all the units reach the market. In practice, nothing guarantees that. This is why CoinGecko shows a market cap / FDV ratio, which indicates what share of the total supply is already circulating.
How to read this ratio
- Close to 1: nearly all of the supply is already in circulation. Little dilution to come through unlocks.
- Low (for example 0.1 to 0.3): most of the units aren't on the market yet. Many units will arrive, which is a potential pressure on the price if demand doesn't keep pace.
Unlocks and vesting: when supply reaches the market
Vesting
Vesting is a schedule for the gradual release of tokens allocated to the team, investors or the treasury. It aims to prevent these holders from being able to sell everything right at launch. Each release is called an unlock.
Cliff and linear
The Tokenomist platform (formerly Token Unlocks) distinguishes two main forms:
- Cliff unlock: tokens unlocked at intervals longer than a day, for example weekly, monthly or yearly. In everyday usage, the "cliff" also refers to the initial period during which nothing is unlocked, followed by a first large unlock.
- Linear unlock: tokens released daily, in regular amounts.
Tokenomist also uses the concept of emission, defined as the net sum of inflation (units created) and deflation (units burned).
Why unlocks matter
An unlock doesn't automatically mean a sale. But it increases the available supply, often to the benefit of holders who obtained their tokens at a price well below the market price. Watching the unlock calendar, through the project's official documentation or dedicated tracking tools, lets you anticipate these moments.
A concrete example (fictional figures)
Take an imaginary token, TOKX. All the figures below are invented for educational purposes.
- Max supply: 1,000,000,000 TOKX
- Circulating supply: 100,000,000 TOKX (10%)
- Price: $2
Calculations:
- Market cap = 100,000,000 × 2 = $200 million
- FDV = 1,000,000,000 × 2 = $2 billion
- Market cap / FDV ratio = 200M / 2,000M = 0.1
The schedule provides for a 12-month cliff for the team and investors (400,000,000 TOKX in total), followed by an unlock of 25% of their allocation, or 100,000,000 TOKX, at the end of that cliff.
On that day, the circulating supply goes from 100 to 200 million TOKX: it doubles. If the price stayed at $2, the market cap would rise to $400 million. For that to happen, the market would have to absorb 100 million additional tokens without a price drop, which is far from a given.
Another way to look at it: if the market cap stayed at $200 million after the unlock, the mechanical price would be 200M / 200M = $1, a 50% drop. This illustrates dilution; it is not a prediction: in reality, demand, holder behavior and market anticipation change the outcome.
Mistakes to avoid
- Comparing unit prices. A token at $0.001 is not "cheap": look at the market cap and the FDV.
- Ignoring FDV. A project with a small market cap but a very high FDV can suffer heavy dilution.
- Mixing sources. CoinMarketCap and CoinGecko don't calculate FDV the same way, and their circulating supply figures can differ. Always specify where your figures come from.
- Believing market cap = money invested. It is just a price × quantity product, easily inflated on an illiquid asset.
- Forgetting the unlock calendar. Check it before buying a recent token.
- Neglecting concentration. If a few addresses hold most of the supply, they can weigh heavily on the price.
Frequently asked questions
What is the difference between market cap and FDV?
Market cap multiplies the circulating supply by the price. FDV (fully diluted valuation) is a theoretical valuation, calculated as if the entire supply were already in circulation.
Why don't CoinMarketCap and CoinGecko show the same FDV?
Because they start from a different supply: CoinMarketCap uses max supply, CoinGecko uses total supply.
What is a token unlock?
The release of previously locked tokens (vesting), either all at once after a waiting period (cliff) or gradually (linear). It increases circulating supply and can weigh on the price if demand does not follow.
Is a low market cap to FDV ratio a bad sign?
It is a signal to watch: a large share of the supply has yet to be unlocked, which points to future dilution. Check the unlock schedule in the project's official documentation.
Key takeaways
- Market cap = circulating supply × price; it measures a size, not a quality or an amount invested.
- FDV is a theoretical valuation if the entire supply were in circulation; CoinMarketCap uses max supply, CoinGecko uses total supply.
- A low market cap / FDV ratio signals that a large part of the supply is still to be unlocked.
- Unlocks (cliff or linear) increase circulating supply and can weigh on the price if demand doesn't keep up.
- Some cryptos have a fixed cap (Bitcoin, 21 million), others a dynamic supply (Ethereum, issuance and burn).
- Always check the tokenomics in the project's official documentation, in addition to the aggregators.