Market Cap vs Fully Diluted Valuation
Explain market cap and fully diluted valuation using explicit price and supply definitions, including why neither metric measures available liquidity.
Overview
When translating these concepts into an integration, keep the scope described by the wallet history api with the result. The examples in wallet transaction history and smart contract event logs show how the same distinction affects neighbouring data questions.
Market capitalisation and fully diluted valuation multiply a price by a supply quantity. Their interpretation depends on both inputs. Neither is the amount of money that could be withdrawn from a market.
Name the supply model
Market cap commonly uses a circulation estimate. Fully diluted valuation uses a broader supply assumption, which may be maximum, total or another stated figure. Do not assume every token has a fixed maximum supply. Store the methodology and observation time rather than relying on an unlabeled supply field.
Worked example: two denominators
A token price is two units. Estimated circulation is one million tokens, giving a two-million market cap under that definition. A ten-million-token dilution assumption produces twenty million. The difference reflects supply assumptions, not an additional eighteen million of executable buyer demand.
Preserve uncertainty
Label missing circulation estimates and unbounded or governance-dependent supply models. Test token splits, rebases and mismatched price/supply timestamps. For comparisons, use compatible definitions across assets. Keep liquidity, turnover and valuation as separate metrics so a ranking does not imply that a headline capitalisation can be realised through an immediate sale.
A practical acceptance test
Use price two, circulating estimate one million and dilution assumption ten million. Assert two distinct derived values with their supply definitions. Remove maximum-supply evidence and ensure FDV does not silently borrow current total supply under an unlabeled assumption. Neither value should be exposed as available withdrawal liquidity or cumulative cash invested.
Questions about the topic
Frequently asked questions
Is FDV always based on a fixed maximum supply?
No. The selected dilution definition must be stated.
Does market cap measure cash invested?
No. It is a price-times-supply calculation, not a cash-flow total.
Standards & technical documentation