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If you are short on WLD, are you still watching FDV for currency speculation?

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The total circulating market value exceeds OpenAI, and why does WLD, whose FDV seriously "exceeds the standard", keep rising?

Author: Kaori, BlockBeats

Editor: Jack, BlockBeats

WLD rose from $2 to $9 within a week, causing a stir both inside and outside the AI industry. However, the cryptocurrency market is divided due to WLD's FDV.

FDV (Fully Diluted Valuation) refers to the complete diluted value of a token, which corresponds to the market capitalization (Market Cap) obtained by multiplying the current coin price by the current token circulation. FDV is an indicator obtained by multiplying the current coin price by the total token supply.

This is a familiar term for Degen, but if you just heard about it, don't worry. This article will use WLD as an example to explain the meaning of FDV to you. Should we still use FDV as a reference indicator for cryptocurrency trading in the new cycle? And what new perspectives on understanding the market does FDV reflect?

WLD's FDV has reference value?

WLD's current circulating supply is about 130 million, with a market value of $1.1 billion and ranked 76th. Its total supply is 10 billion, with a fully diluted valuation of $85.6 billion, surpassing SOL, BNB, and other top-tier public chains, and even the market value of the world's leading AI concept, OpenAI.

The market disagreement also appears here. Some people believe that the FDV of WLD has reached an unreasonable level, and this price is completely unsustainable, just a bubble riding on the AI trend. While another group of people believe that the circulation of WLD is too low, and it depends on the willingness of market makers to push it up. FDV is just a bluff.

Worldcoin's white paper shows that the maximum circulating supply of WLD at launch is 143 million, of which 100 million WLD will be loaned to market makers outside the United States, and 43 million WLD will be distributed to users who pass Orb verification during the testing phase. Since the official launch of World App, a single user can receive a total of 77 WLD subsidies. However, WorldCoin is facing significant regulatory pressure in countries such as France and Hong Kong, and offline iris scanning devices and sites have been subject to certain restrictions, resulting in a large portion of users' tokens being unable to be withdrawn.

On the other hand, 5 WLD market makers returned 25 million WLD at the end of October last year, and the remaining 75 million WLD was returned to the Worldcoin project on December 15. Subsequently, Worldcoin announced that it had reached a new loan agreement with these 5 market makers, which will take effect on December 16, 2023. The total amount of this loan is 10 million WLD, with a term of 6 months.

Therefore, the current circulating tokens of WLD in the market only include two parts: one is the tokens held by users who have received daily allowances through the APP and have already withdrawn them, and the other is the 10 million held by market makers. This circulating supply accounts for only 1.33% of the total supply of WLD. In addition, the unlocking period of WLD is 150 days, so in the short term, the FDV of WLD is not indicative, and the argument that it exceeds the market value of OpenAI is more like an AI meme.

Do not focus on FDV, what should you focus on?

Who needs to look at FDV when trading cryptocurrencies?

For those who need to hold a certain currency for a long time, such as institutions or conservative investors, they need to manage their investment or position through FDV. At this time, FDV combined with market value is an effective indicator for monitoring the prospects of tokens, which can help investors better judge whether the value of a project is extremely deviated from the standard. However, for ordinary retail investors, the main consideration in short-term trading should be the supply and demand relationship of tokens, as well as the narrative and emotions. If you pay attention to FDV, you also need to combine the token's issuance schedule.

FDV is becoming less important, which actually reflects some changes in the cryptocurrency industry. It is these changes that require us to pay attention to things beyond FDV.

Supply and Demand Relationship

First of all, the number of people in the entire encryption industry is increasing. Previously, there were only ICO and retail investors, but now there are more and more buyers, and stakeholders are also increasing. For a large project, many aspects such as several rounds of financing, coin sales, airdrops, market makers, CEX, etc. are all affecting the supply and demand relationship of tokens. In the context of such industry development, the FDV reflected by the total token supply does not have reference value in a certain period of time.

With increasing demand, the total token supply is growing, and the linear unlocking time period is getting longer. Looking at the bright side, the project hopes that newcomers can still buy their own tokens, which is a manifestation of some kind of long-termism. However, if the project wants to reduce the impact of FDV on token prices, they still need to continue to deepen their efforts in unlocking timing and creating demand.

Left: FTT unlocking timeline; Middle: OP unlocking timeline; Right: STRK unlocking timeline (not updated to the latest version)

The impact of unlocking timeline on coin price can be illustrated by the recent Tianwang project Starknet, which has just completed its airdrop. StarkWare announced an adjustment to its STRK token unlocking plan for early contributors and investors, changing from a one-time release of 1.3 billion tokens on April 15th to only unlocking 64 million tokens and then gradually releasing them linearly. After this news was announced, the price of STRK surged past $2, a 14% increase from before. At this point, the STRK FDV is still high, but the market reaction has clearly digested this positive news.

STRK 24-hour price trend chart

STRK's launch can provide a glimpse into the short-term price impact of a large project token's supply and demand. Why did Starknet's launch cause Binance to surge to $7 and become a standalone coin? Because at that time, the on-chain airdrop was stuck and large holders were unable to sell, while several market makers deposited coins into CEX, resulting in relatively high short-term demand and low supply. As for the long-term supply and demand relationship, the project team needs to balance the interests of all parties, but FDV is no longer a necessary factor for large projects with long unlock times to consider.

Take WLD as an example again. As we calculated roughly earlier, the current circulating supply in the market accounts for only 1.3% of the total supply, and market makers hold 1% of it. From the perspective of price manipulation, the FDV of WLD at this time has no reference value because the number of Orbs that determine the release of WLD is very small, and very few people can actually withdraw WLD from the APP.

Short-term operations, emotions are king

In addition to supply and demand, the upward logic of WLD also needs to consider the power of narrative. A week ago, OpenAI launched the text-to-video model Sora, and WorldCoin, which has been dubbed Sam Altman's encryption project since its launch, also benefited from this wave of AI sector sentiment. And yesterday, thanks to the increase in revenue from Nvidia's financial report after a slight decline, the price of WLD still maintained in the $8 range.

Arthur Hayes once said, "I would rather invest in tokens with a perceived success rate of 0.01% and a narrative in the viral growth stage, than tokens with a perceived success rate of 50% but a narrative that has reached the common sense stage. If the success rate increases from 0.01% to 1% because the narrative quickly infects many people, my money will increase 100 times."

When faced with the fervor of the AI industry, the logic behind the surge in WLD due to strong control of the market is actually quite easy to understand. On the other hand, those who currently mention FDV remind people of the somewhat humorous saying "when spreading FUD, mention FDV; when giving investment advice, mention MC."