FDV is price multiplied by max-supply or total supply, rather than by circulating-supply. It answers the question "what am I actually paying for this network?" when most of the supply is not yet liquid.
A large gap between market cap and FDV is a warning sign, because the difference is future supply arriving into whatever demand exists then. It is the crypto equivalent of heavily diluted equity.
Example: a token at $5 with 50m circulating and 500m total shows a $250m cap and a $2.5bn FDV. Buying at that price means paying a $2.5bn valuation while only 10% of holders can currently sell into it. Compare FDV, not cap, across projects.
Related: circulating-supply, max-supply, tokenomics, token-unlock