Investments and tokenomics
Lesson 11 of 12 in the course “Analytics”. Free, with animations and a quiz.
Three kinds of supply
Tokenomics is how a project's tokens are set up: how many there are and who holds them. Start with supply. Example from the picture: max supply 1B, there will never be more. Total supply 800M: already issued, locked ones included. Circulating supply 100M: trading freely on the market. The unlocks from the previous lesson are exactly what moves tokens from locked to circulating.
Market cap vs FDV
Market cap is price × circulating supply, meaning what the tokens on the market are worth. FDV (fully diluted valuation) is price × max supply. Example from the picture: price $2, 100M circulating, 1B max. Market cap: $2 × 100M = $200M. FDV: $2 × 1B = $2B. A 10x gap: 90% of the tokens aren't on the market yet.
Low float, high FDV
Float is the share of tokens in circulation. Example from the picture: 10% circulates, while 90% is locked and waiting for unlocks. The price sits on a thin market: few tokens are trading. Every unlock adds supply, and the price needs new demand to hold. Check market cap / FDV: $200M / $2B = 10%. The smaller this number, the more tokens are still ahead and the bigger the risk.
Who invested at what valuation
A round is a stage where a project sells tokens to investors before it hits the market. Seed is the earliest and cheapest, private comes next. Valuation is what the whole project was priced at back then. Example from the picture: seed $20M, private $80M, public $500M, and FDV is now $2B. $2B / $20M = 100x for seed. The bigger the gap, the stronger the motive to take profit.
Same logic in the token price
The same maths works on the token price. Example from the picture: seed bought at $0.05, the private round at $0.20, and the price is now $1. Seed's gain: 1 / 0.05 = 20x, private's: 1 / 0.20 = 5x. They have gains to lock in, meaning sell and pocket the profit. The trap: big-name funds on the investor list don't guarantee growth. They can sell at unlocks too.
Where to check rounds and metrics
Crypto Fundraising: a database of rounds, check the amount, date and funds. CryptoRank: fundraising (raising money from investors), investor lists and token metrics. Messari: research, asset data and project profiles. Dropstab: investments and unlocks side by side. Hit an unfamiliar term? Do not guess or ask a random chat: open a free glossary.
Mistake: the "cheap" coin
A coin at $0.01 isn't necessarily cheaper than one at $50. Example from the picture: A costs $0.01 × 100B tokens = a $1B market cap. B costs $50 × 10M tokens = $500M. A is "cheaper" per coin but worth twice as much. For A to reach $1, its market cap would have to be $1 × 100B = $100B. Compare market cap and FDV, not the price per token.
Tokenomics checklist
Before analysing any token: 1) market cap and FDV, and how many times apart they are (10x in the picture); 2) what share already circulates; 3) who invested and at what valuation; 4) when the next unlocks are and what % of circulating supply they add. The basics: this is context, not advice to buy or sell. Good tokenomics won't save you from a bad market.
Check yourself
- What is the FDV, the valuation if every token were issued?
Correct answer: $2B. FDV = price × max supply = $1 × 2B = $2B. That is 10 times the market cap: 90% of tokens are still to come, and every unlock will add supply. - Which coin is cheaper?
Correct answer: Impossible to say without market cap and FDV. Price per token depends on how many tokens exist. If A has 1 trillion tokens, its market cap is $1B, and a 100x would need a $100B market cap. A project's valuation is shown by market cap and FDV, not the price of one unit. - What is the main risk?
Correct answer: Future unlocks will add a lot of supply. 92% of tokens are still to come. Every unlock adds supply, and for price to hold, new demand is needed. The smaller market cap / FDV is, the more pressure lies ahead. - What does it mean?
Correct answer: Early investors sit on big profits and may sell. $1B / $10M = 100x for seed. Even if price halves they are still hugely up, so the motive to take profit at the unlock is strong. It is not a price forecast, it is context.