It’s a rite of passage for everybody in crypto to have an existential crisis when pondering over the importance of fully diluted valuations. There’s been cases where investors have psyched themselves out of investing into a project because the FDV was “too high” or vice versa, investing at a seemingly attractive FDV but underperforming. What gives? There seems to be confusion in how to properly analyze FDV.
Before jumping in let’s look from the context of a bull market, a rising tide typically lifts all boats. Bullish views and statements drown out more cautious sentiment and risks presented. If you’re trying to outperform crypto market beta (i.e BTC or ETH), making mistakes like misjudging ramifications of a project’s FDV in the early stages of a bull run cycle can be costly. Also, you’re dealing with more rapid price discovery to start. In contrast to BTC and ETH, alts are more of a levered BTC and typically tend to see bigger corrections. In this piece, I’ll touch on the intricacies behind FDV and why understanding them early in an asset’s lifecycle can help guide better decisions based off risk/re