## Is FDV a Trap or a Real Risk? Definitions and Cases Every Trader Must Know

In every bull market cycle, there is always a type of coin that people love and hate at the same time — those projects with **extremely high FDV but very low circulating supply**. They tell a beautiful story with a fully diluted market cap, but when tokens unlock, they stage a "harvesting" show. Is FDV a pricing tool or a market bubble indicator? This article will dissect this controversial topic from a trader’s perspective.

## What is FDV? A Chart to Understand Fully Diluted Market Cap

**FDV (Fully Diluted Valuation) = Current Token Price × Total Supply**

Simply put, FDV assumes all planned tokens are already in circulation and included in the market cap. Unlike circulating market cap:

- **Circulating Market Cap**: Only counts tokens currently tradable
- **FDV**: Includes locked tokens, future mining/minting tokens, all counted

Example: Bitcoin’s current price is $95,920, with a total supply of 21 million coins, so BTC’s FDV is approximately $1.92 trillion.

## Why Do Traders Care About FDV? Two Perspectives in Conflict

### Supporters’ reasons

**Seeing the future window**: FDV helps you see a project’s "ceiling" — if all tokens are released as planned, how much could the market cap grow? This provides reference for long-term HODLers.

**Facilitates cross-comparison**: Comparing different tokens with FDV can more accurately assess their relative market size.

### Skeptics’ reasons

**Data based on assumptions**: Not all planned tokens will necessarily be released. Projects may change their roadmap and adjust supply through token burns.

**Ignoring real demand**: FDV only looks at supply, completely ignoring user adoption, real use cases, and community strength. High FDV ≠ project success.

## Arbitrum Case: Seeing the Real Face of Unlock Risks

On March 16, 2024, Arbitrum experienced a "black swan" token unlock event.

**The numbers were staggering**:
- 111 million ARB tokens suddenly unlocked
- This accounted for **76%** of the circulating supply, double the previous tradable volume
- ARB’s price, which was in a consolidation zone of $1.80–2.00, plummeted over **50%**

This was no coincidence. Traders anticipated the unlock risk and started selling to cash out. Once a large new supply flooded the market, panic selling followed, creating a "self-fulfilling prophecy" — everyone rushed to sell, and the price crashed.

Current ARB data: price at $0.21, FDV reaching $2.07 billion. Although the project still has value as an Ethereum layer-2 infrastructure, that unlock taught holders a deep lesson.

## More Cases of "FDV Fever"

Signs of history repeating:

**Filecoin(FIL)**: Back then, driven by distributed storage concepts and high FDV, attracted hot money, and the price soared temporarily, then sharply corrected. Currently, FIL is priced at $1.48, with an FDV of $2.89 billion.

**Internet Computer(ICP)**: Similar trajectory, once hyped by "cloud computing" narratives, then fell into a long bear market. Now priced at $4.11, with an FDV of about $2.25 billion.

**Serum(SRM)**: A DeFi concept coin, once at its peak, now back to historical lows. Current price is $0.01, with a fully diluted market cap of only $12.92 million.

These projects share a common pattern: "storytelling → attracting VCs and retail investors → unlocking wave → crashing → disillusionment."

## Why Do Unlock Waves Trigger Stampede-Like Drops?

1. **Expectational Selling**: Professional traders pre-position based on unlock dates; retail investors see the price drop and follow suit.
2. **Supply Shock**: Sudden increase in new supply, demand can’t keep up, leading to price drops.
3. **Confidence Collapse**: When FDV "promises" turn into reality through unlocking, investors realize the project isn’t as exciting as they thought.
4. **Panic Spread**: One person sells, triggering others to sell, eventually leading to collective dump.

## Cold Reflection Behind the Data

Data compiled by institutional investors(@dyorcrypto shows that high FDV + low circulating supply often become "risk reservoirs":

- These projects tend to attract short-term capital
- But they are also most vulnerable to rapid sell-offs during negative events (like unlocks)
- Projects without real application support are especially fragile

**Key question**: Don’t judge solely based on the unlock schedule. You also need to consider:
- The project’s roadmap and execution
- On-chain activity and TVL data (if applicable)
- Community size and retention
- Whether there are real use cases

## Final Advice

**FDV is neither a "must-read indicator" nor "junk data," but a reference point when doing your homework**.

Before evaluating any high-FDV project:
1. Clarify the token release schedule and mark all key unlock dates
2. Compare circulating market cap and FDV to understand the "potential dilution"
3. Deeply research the project fundamentals — don’t just be swayed by the story
4. Ask yourself: if the circulating supply suddenly doubled, how would the price react? If you can accept a 50%+ drop, consider entering

**Remember**: In the crypto market, today’s hype story often becomes tomorrow’s trap. Do thorough research, and DYOR always remains relevant.