Tokenomics 102: Digging Deeper on Supply

On the surface this appears to be very community oriented, because anyone can buy the tokens, create liquidity, and stake it to earn more tokens. But depending on how it’s done, this could be a subtle way for the initial team or insiders to dramatically increase their share of the tokens.

The market cap is the circulating supply of tokens multiplied by the token price. The FDV is the current price multiplied by the max supply, if all tokens were in circulation.

The 35% of tokens allocated to the team and advisors are vested over 2 years, with a 6 month initial cliff. So 30% of tokens are initially unlocked, and then 35% come into the market over an 18 month period starting in month 6. So there’s approximately 2% of the supply hitting the market consistently per month for that period, then the inflation st... See more

You can get a decent amount of the information from public dashboards like Coingecko, but digging into the details in a project’s docs can help flush out some of these subtler details like how the emissions schedule is changing over time, who the tokens are going to, and what unlocks might be happening in the future.

So if a token has a price of $10, a circulating supply of 10,000,000, and a max supply of 100,000,000, then the Market Cap would be $100,000,000 and the FDV would be $1,000,000,000. 

2% hitting the market when 30%+ is already in circulation is a relatively small increase. The token supply will double over 15 months, but that’s more than enough time for the value of the project to catch up to the token price.

If the market cap is 10% of the FDV and the tokens are all released in the next year, the project needs to grow 10x, or 1000%, in a year just to maintain its current price. 

Max supply is fairly simple. What is the maximum potential supply of this token? For Bitcoin it’s 21,000,000. Ethereum doesn’t have one. For Crypto Raiders we set it at 100,000,000. For Yearn it’s 36,666.

If you see a big difference between the market cap and FDV, that means there are a lot of tokens locked up waiting to come on the market, and you should investigate how they’re going to enter the market (3 & 4) to see if you think the current price is justified.