If you’re getting into crypto, there are a few things you got to understand to make smart moves. I’m talking about market cap, fully diluted valuation (FDV), and tokenomics. These are super important no matter how long you’ve been in the game. Let’s break it down in very simple terms.
What is Tokenomics?
Tokenomics is just a fancy way of talking about how a cryptocurrency works — its supply, how many coins are out there, and how many more might come in the future. It helps you understand the value of a coin, now and later. You’ll want to know this stuff if you want to make good decisions.
Market Cap: What’s the Value of a Coin?
The market cap is the total value of a coin at that moment. It’s calculated by multiplying the current price of the coin by how many coins are out there. For example, Bitcoin has around 19.7 million coins in circulation. If each coin is worth $101,000, the market cap would be $2 trillion.
Market cap helps you figure out how big or small a coin is. Big market caps usually mean the coin is stable, while small ones can be riskier but have bigger potential for growth. So, if you’re comparing Bitcoin ($2 trillion market cap) to Solana ($114 billion market cap), Bitcoin needs a lot more money to move its price than Solana does.
Fully Diluted Valuation (FDV): What’s Coming in the Future?
FDV takes into account the total number of coins that will ever exist, not just the ones that are out there today. So, if a coin has a supply limit of, say, 100 million, but only 50 million are in circulation, the FDV will include those 50 million coins that are still locked up or not yet mined.
For Bitcoin, the total supply is 21 million coins. Right now, about 19.7 million are out there, so Bitcoin’s FDV is higher than its market cap. FDV matters if you’re thinking long-term because as more coins are released, the price can get affected.
Should You Focus on Market Cap or FDV?
It depends on what you’re doing. If you’re buying and selling coins quickly, focus on market cap because that shows you the current value of the coins that are out there. But if you’re planning to hold for a year or more, then FDV is important because it tells you how many more coins will be released over time, and that could affect the price.
Token Unlocks: When More Coins Get Released
Some coins lock up tokens for a certain period of time. When those tokens unlock, they get released into the market, which can cause the price to drop if there are too many tokens entering circulation at once. That’s why it’s good to track token unlocks — they can really affect the value of your investment.
There are websites that help you track when tokens will be unlocked, like Tokens unlocked or check out my newsletter Bukz newsletter. These sites shows you upcoming unlocks and many more about crypto so you can get a heads-up on when more tokens will hit the market.
Liquidity: Can You Buy or Sell Easily?
Liquidity is how easy it is to buy or sell a coin. If there’s low liquidity, it’s harder to sell without messing with the price. Large coins like Bitcoin or Ethereum have high liquidity, meaning you can sell or buy a lot of them easily. But smaller, newer coins might have low liquidity, which means if you try to sell a lot, it could cause the price to drop a lot.
You can check the liquidity of coins on sites like Dex Screener to see how easily you can move in and out of positions.
Quick Recap
Here’s a quick rundown of the key things to remember:
Market Cap: The total value of a coin based on the current supply.FDV: The total value of a coin when all the coins have been released.Liquidity: How easy it is to buy or sell a coin.
These terms will help you make better choices when investing or trading crypto. Keep track of these numbers, and use tools like Token Unlocks and Dex Screener to stay informed.
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Market Cap and Tokenomics: Why Should You Care? was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.