What is Low Float, High FDV?

Low Float, High FDV is a phenomenon in the cryptocurrency market that has gained significant attention in recent years. It refers to tokens that launch with a small circulating supply (low float) but have a high fully diluted valuation (FDV).

What is Float?

In this context, "float" represents the number of tokens available for trading in the open market. A low float means that only a small percentage of the total token supply is circulating. On the other hand, "fully diluted valuation" (FDV) is calculated by multiplying the current token price by the maximum supply of tokens that will ever exist. When a token has a low float but a high FDV, it indicates that a large portion of the total supply is locked or yet to be released.

This market structure has become increasingly common in recent years, particularly among newly launched tokens. According to a study by CoinGecko, 21.3% of the top 300 cryptocurrencies by market capitalization are considered low float, with the majority of these launched in the last four years. These tokens often start with a small circulating supply, sometimes as low as 2% of the total supply, as seen in the case of Worldcoin (WLD).

Problem with Low Float, High FDV

The low float, high FDV model has several implications for the market. Initially, it can lead to rapid price appreciation due to the limited supply available for trading. However, as more tokens are unlocked and enter circulation over time, it can create significant selling pressure. This dynamic has raised concerns about the long-term sustainability of such tokens and their potential impact on retail investors.

Critics argue that this structure leaves little upside for traders after the token generation event (TGE), as much of the potential value has already been captured by early private investors and venture capitalists. This has sparked debates within the crypto community about fair token distribution and the role of venture capital in the industry.

The trend towards low float, high FDV tokens has also prompted responses from major players in the crypto space. For instance, Binance announced a strategic shift towards listing small to medium-sized projects in response to these concerns. This highlights the growing awareness of the potential issues associated with this token structure and efforts to address them.

As the crypto market continues to evolve, the debate around low float, high FDV tokens is likely to persist. It underscores the importance of thorough due diligence for investors and the need for projects to consider long-term tokenomics that balance the interests of all stakeholders.