Three numbers sit at the heart of every crypto valuation decision: market cap, fully diluted valuation (FDV), and total value locked (TVL). Misunderstanding these — especially the FDV trap — has caused millions of dollars in preventable losses from token unlock selling pressure.
The current total market value of all tokens currently in circulation. This is the headline number on CoinGecko and CoinMarketCap. It only counts tokens that are currently tradeable — NOT tokens held by team, investors, or not yet vested.
The total market value IF all tokens (including locked, unvested, and future emissions) were in circulation at current prices. This is the true "what the project is worth if fully priced in" number. When FDV >> Market Cap, massive future dilution is coming.
For DeFi protocols, TVL measures how much capital users have deposited. It's like revenue or assets under management for traditional finance. A protocol with high TVL and growing fees is fundamentally strong; high TVL and zero fees is often inflated by incentive programs.
Here's a common pattern: A new DeFi token launches with only 5% of total supply in circulation. Price is $1, market cap is $50M — looks reasonable. But the FDV is $1 billion. Over the next 2 years, the remaining 95% unlocks. Each unlock wave creates selling pressure. The market cap at launch was only the "launch tax" — the FDV was always the true implied valuation.
Always check: What % of total supply is currently circulating? When do locked tokens unlock? CoinGecko and Messari provide token unlock schedules.
For DeFi tokens, a useful quick metric is Market Cap ÷ TVL. A ratio below 1 suggests the token may be undervalued relative to the economic activity it facilitates. A ratio above 5-10 suggests high speculation premium. Compare within the same DeFi category for meaningful signals.