Market Cap Vs Diluted Valuation

Market capitalization represents the total value of the circulating supply of a token, while fully diluted valuation estimates the total value if the entire maximum supply were in circulation. The gap between these two figures is a critical metric for evaluating the long-term sustainability of a project's tokenomics.

A large discrepancy often indicates significant future sell pressure from upcoming token unlocks, which can weigh heavily on the price. Conversely, a small gap suggests that most of the supply is already in the market, reducing dilution risk.

Investors use this comparison to gauge whether an asset is overvalued or if the market has yet to account for future supply expansion. It is a foundational tool for assessing the risk-reward profile of digital assets.