What Is Tokenomics? How to Evaluate a Coin Before You Buy
Two coins can look similar, yet one keeps getting cheaper because new tokens keep being issued. Tokenomics is the set of rules a coin lives by. Here's how to read it.
What it is
Tokenomics is the economics of a token: how many coins exist, how many there will be, who holds them, and what they're for.
Key metrics
| Metric | What it means |
|---|---|
| Circulating supply | How many coins are in circulation now |
| Total / max supply | How many coins there will be in total (21 million for bitcoin) |
| Emission | How many new coins are issued over time |
| Unlocks | When the team and investors will be able to sell their tokens |
| Distribution | Shares held by the team, funds and the community |
What to look at
- The gap between market cap and fully diluted valuation (FDV). If only 10% of coins are in circulation, a lot of new supply is coming.
- The unlock schedule. A large unlock can put pressure on the price.
- The share held by the team and funds. The bigger it is, the higher the risk of selling.
- What the token is for: paying fees, voting, staking. A token with no use relies on demand alone.
The data is available on CoinMarketCap, CoinGecko and in the project's documentation. Good tokenomics doesn't guarantee a price rise, while bad tokenomics is a common sign of a pump and dump. On the risks, see the article altcoins.
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- Tokenomics is how many coins, who holds them, and why.
- Check unlocks and the team's share before buying.
- A big gap between market cap and FDV means new coins are on the way.
Frequently Asked Questions
What is FDV?
Fully diluted valuation: the coin's price multiplied by the maximum number of tokens. It shows what the project would be worth if all coins were already in circulation.
Where can I see the unlock schedule?
In the project's documentation and on dedicated unlock-tracker websites. Major aggregators also show some of this data.
Does a low coin price mean it's cheap?
No. The price of one coin tells you nothing without the number of coins. Compare market cap and FDV, not the price per coin.
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