Reading a tokenomics page

Wonder

1. What is the economic difference between a token’s current market capitalization and its fully diluted valuation?
2. How do vesting cliffs and linear unlock schedules determine the timing of selling pressure from early investors?
3. Why does a low circulating float relative to total supply create structural headwinds for price stability?

Explore

1. Token supply is not static; it is layered. Circulating supply counts only tokens currently tradable on open markets, excluding locked allocations held by teams, investors and protocols. Total supply includes all issued tokens, while maximum supply represents the hard cap if one exists. Market capitalization equals price multiplied by circulating supply, a metric that reflects current liquidity. Fully diluted valuation (FDV) multiplies price by total or maximum supply, projecting what the asset would be worth if every locked token were immediately released.
2. A low float with high FDV indicates that most tokens remain locked and will unlock into the market over time. This structure creates predictable selling pressure as vesting periods end. Binance Research’s May 2024 report ‘Low Float & High FDV’ found that tokens launched in 2024 had on average only about 12.3% of supply circulating (MC/FDV ratio). The same report estimated that approximately $155 billion worth of tokens would unlock between 2024 and 2030, requiring roughly $80 billion in new demand to absorb this supply at constant prices.
3. Vesting schedules dictate when insiders can sell. A ‘cliff’ is an initial period during which no tokens vest; after the cliff, tokens typically release linearly over months or years. For example, a four-year vesting with a one-year cliff means zero tokens are available for sale in year one, then 25% unlocks at month twelve, followed by monthly drips. Understanding these schedules is critical because large unlocks often coincide with price volatility as early holders exit positions to recoup capital or take profit.
4. Emissions from staking rewards also expand circulating supply. In proof-of-stake systems, validators earn new tokens for securing the network, increasing float continuously. Unlike one-time vesting unlocks, emissions are perpetual and tied to protocol activity. This ongoing inflation dilutes existing holders unless offset by fee burn mechanisms or increased demand. Readers must distinguish between one-time insider allocations and continuous protocol emissions when analyzing total supply growth.
5. The trade-off for early backers is access at low prices in exchange for long lock-ups. Venture funds accept multi-year vesting to secure initial tokens, betting on future appreciation exceeding the opportunity cost of capital. For public buyers, this structure means entering a market where significant sell pressure is already scheduled. The transparency of on-chain data allows anyone to track these unlocks, removing informational asymmetry that existed in pre-blockchain equity markets.
6. Open a token-unlock tracker such as TokenUnlocks or CoinGecko’s supply tab. Select a major protocol and identify its next large vesting event. Note the date, the percentage of total supply unlocking, and whether it is subject to a cliff or linear release. Compare this upcoming unlock size against the current daily trading volume to assess potential market impact.

Key facts

Exercise nine, six, three, one

Fact check

Dates, figures and claims checked against the published sources listed below.

• Binance Research, 'Low Float & High FDV: How Did We Get Here?' (May 2024)
• Tokenomist (formerly TokenUnlocks), unlock schedules
• ultrasound.money (ETH issuance and burn data)