This is an explainer of two valuation conventions and a supply-schedule risk, with a worked example. It evaluates no specific token. Nothing here is investment advice. Decisions are yours.
Market capitalization multiplies price by the tokens circulating TODAY. Fully diluted valuation, FDV, multiplies the same price by every token that will EVER exist. The gap between those two numbers is a schedule of future supply waiting to arrive, and misreading it is one of the most reliable ways this market separates newcomers from their capital.
The two numbers, precisely
Market cap: price times circulating supply, where "circulating" means tokens actually free to trade, not locked in team, investor, foundation, or emissions contracts. FDV: price times maximum supply, counting every token in every vesting schedule and emission curve as if it traded today at today's price. Neither number is wrong; they answer different questions. Market cap sizes the market that exists. FDV prices the claim that today's valuation could survive the arrival of all future supply, a claim the market gets to vote on one unlock at a time.
The worked example
Take a token launching at $2 with one billion max supply and only 10% circulating, a completely ordinary structure for new listings. Market cap: 100 million tokens times $2, equals $200 million, a modest mid-cap. FDV: one billion times $2, equals $2 billion. Now run the film forward: over the following two years, vesting releases the other 900 million tokens to teams and early investors whose cost basis is cents. For the PRICE merely to stand still, the market must absorb nine times the existing float, roughly $1.8 billion of new supply at current prices, from sellers who are profitable at almost any price. The chart on day one shows a $200 million project; the obligation is that of a $2 billion one. Buyers who compared it to genuine $200 million projects were comparing a mortgage to a purchase price.
Unlock mechanics: the schedule is the story
Supply arrives on published schedules, cliffs, where a large tranche unlocks on a date, and linear vesting, a steady drip, and both have price physics. Ahead of large cliffs, rational holders hedge or sell the run-up, and sophisticated traders short against the calendar, which is why unlock dates are tracked by every serious desk and why "mysterious" weakness so often precedes them. The drip version is subtler: a token with heavy linear emissions faces a permanent headwind, new supply that must be bought every single day just to hold price, an arithmetic that compounds against holders the way volatility drag does. None of this is secret; schedules are published in project documents and tracked by public unlock calendars. The trap is not hidden information. It is unread information.
The float ratio habit
One derived number does most of the protective work: the float ratio, circulating supply over maximum supply, or equivalently market cap over FDV. Above roughly 0.8, the dilution story is mostly over, what you see is what exists, BTC being the canonical case. Between 0.4 and 0.8, read the schedule, the remaining supply's timing decides whether it is a headwind or an avalanche. Below 0.2, the listed market cap is closer to marketing than measurement: the price was set by a thin float, often deliberately, and the FDV is the honest size of the claim being sold. Our universe rules lean on related logic from the other direction, the 90-day listing-age floor exists partly because new low-float listings produce exactly the price behavior momentum arithmetic misreads, per the universe rules.
Why momentum traders specifically must care
A momentum system hunts strength, and low-float tokens manufacture strength structurally: a small float plus coordinated attention produces spectacular percentage moves on modest capital, the precise signature that tops momentum screens, per the monitor's published formulas. The same structure then delivers the failure: unlocks arrive into the elevated price, insiders monetize, and the chart that screened beautifully becomes a bleed that no stop-placement cleverness fully escapes. The graveyard of 2021-vintage high-FDV launches, most now delisted and invisible to survivor-biased data per the graveyard census, is disproportionately populated by exactly this shape. Checking the float ratio and the next unlock date before acting on any screen hit is thirty seconds of work that filters an entire failure class.
Honest limits
FDV has its own fictions, stated for balance. Max supply is sometimes effectively infinite by design, inflationary emissions, making FDV undefined or meaningless. Distant unlocks discount heavily: supply arriving in 2030 is not equivalent to supply arriving Tuesday, and a naive FDV treats them identically. Burn mechanisms shrink schedules after the fact. And circulating-supply data itself varies across aggregators, since "locked" is a judgment call. The practical posture: use market cap to size the present, FDV to size the claim, the float ratio to grade the gap, and the unlock calendar to time the risk, while trusting none of the four as precision instruments. The dilution trap is avoidable with published information and one worked example's worth of arithmetic, which is exactly what this page was for. Decisions are yours.