Is FDV really a "scalping" tool in the crypto world? Analyzing the ARB collapse to see the true and false of coin prices

The bull market is here, and almost all coins are rising. But have you noticed that many projects have an extremely high fully diluted valuation (FDV), while their circulating market cap is painfully low? Is this truly a golden investment opportunity or a carefully crafted trap?

What exactly is FDV

Simply put, FDV is the current coin price multiplied by the total token supply. It sounds straightforward, but the meaning of this number is far more complex than you might think.

For example, Bitcoin, with a current price of $96.42K and a supply of 21 million coins, has an FDV of $1926.20B. But this doesn’t mean Bitcoin is worth that much right now — it’s just a theoretical market cap assuming all tokens are in circulation.

The core logic of FDV involves two parts of the total token supply:

• Unlocked tokens: those currently trading on exchanges
• Unreleased tokens: locked, yet to be mined, or planned for future issuance

This is where the problem lies.

Market Cap vs FDV: A huge misconception

Many people confuse FDV with market cap. In fact, they are very different.

Market cap is calculated as circulating tokens × current price. FDV is all possible tokens × current price.

A project’s circulating supply might only be 10% of the total supply. This means 90% of the tokens are still hidden, waiting to be released. Once these tokens unlock, the supply can suddenly surge, while demand may not keep up — resulting in a sharp price drop.

ARB’s “Death Kiss”: From fever to cold water

In March 2024, Arbitrum experienced a major unlock. 111 million ARB tokens were suddenly released, accounting for 76% of the circulating supply at the time. In simple terms, the tradable ARB in the market doubled.

At that time, ARB’s price hovered between $1.80 and $2. Traders sensed the risk and started to exit early. What happened? ARB had already collapsed before the unlock. After the unlock, a wave of selling broke the support, and the price plummeted over 50% instantly.

This isn’t a problem with ARB’s technology. It’s the market showing with real action: a 76% increase in supply with no corresponding demand growth, leading to a price crash.

In comparison, ARB’s current FDV is $2.09B, and its market cap is painfully low. The project’s long-term fundamentals might still be good — it’s an important Layer 2 network on Ethereum — but the short-term token release risk is enough to pressure the price.

The “curse” of high FDV and low circulating supply

Data shows that the combination of high FDV and low circulating supply often indicates risk. There are two psychological factors behind this:

1. Premature selling: Smart money sees upcoming unlocks and cuts positions early to cut losses

2. Herd mentality: Once the price starts falling, retail investors follow suit, creating a self-reinforcing downward spiral

Many VC-backed projects get caught in this. For example, Filecoin (FIL, FDV $2.95B), Internet Computer (ICP, FDV $2.33B), Serum (SRM, FDV $13.13M) — these once-star projects have experienced a fall from grace. Their common point: early high FDV and VC backing attracted retail investors to chase high prices, but later token releases and unmet fundamentals caused sharp declines.

Is FDV really a joke?

Not entirely. FDV can be useful in certain scenarios — it helps you see a project’s potential space and risks. But it’s definitely not the only indicator for judging a coin’s value.

Attractions of high FDV:

• Low circulating supply appears “scarce,” which can push prices higher
• If the project succeeds, this FDV can shrink rapidly
• For long-term holders confident in the project’s prospects, it’s leverage

Traps of high FDV:

• Token unlocks are a matter of when, not if
• Many high-FDV projects rely on storytelling, lacking real utility
• Community and market demand may not support this valuation

Lessons learned: Is this time really different?

VC coins in 2024-2025 are repeating history. Concepts like DePIN and RWA are indeed hot, but fundamentally they are still stories. Projects need to prove themselves — through real user numbers, trading volume, and ecosystem health — not just FDV numbers.

Smart traders are no longer blindly chasing high FDV projects. They look at three things:

1. Token release schedule — when will large unlocks happen
2. Project fundamentals — is there real demand
3. Liquidity quality — can large sell orders be absorbed

Final warning

FDV isn’t a scam, but it’s a tool that can be easily abused. Don’t be blinded by a huge FDV number. Ask yourself:

• Why does this coin need so many tokens?
• Are there any major unlock events in the next 24 months?
• Does the project’s actual adoption support this valuation?

Before trading in the crypto space, do your homework. A shiny FDV number can’t prevent a sudden crash caused by a token unlock.