Study shows that Total Value Locked (TVL) is a bad metric for building crypto portfolios and investment decisions
A new study by the Algorand Foundation is one of the most frequently cited metrics of the cryptocurrency sector: Total Value Locked. The report provides some of the strongest evidence that TVL has no influence on the financial performance of a tokens despite the prominence in dashboards, headlines and investor documents.
A recently carried out analysis of over 300 cryptocurrencies (without bitcoin and stable coins) for the period 2023–2024 under the direction of Dr. Matthew Brigida, extraordinary professor of finances at the Suny Polytechnic Institute and chief economist from the Algorand Foundation, showed no evidence that TVL predicts the performance of token.
The research team created weekly portfolios in which the tokens were arranged according to TVL, the upper holding 25 % and the lower ones were sold 25 % to test whether portfolios with high minus low TVL alpha generate. You don’t have that.
“TVL is often used as an indicator of credibility or potential increase in value, but our results show that TVL fails as an investment signal,” said Brigida. “Even after cleaning up, known problems such as double counts, TVL-based portfolios did not provide any abnormal returns.”
TVL is still widespread in the headlines of the crypto media, but according to a study, investors and analysts can mislead. Platforms such as Messari, Artemis and token Terminal now consider TVL as a secondary metric, while Blockworks Rev (Real Economic Value) introduced. Community analysis tools such as Dune and L2Beat either decentralize the TVL interpretation or use metrics such as Total Value Secured (TVS). Nansen adds a context to the behavior of the wallets and smart Money flows, while Flipside Crypto emphasizes the value of high-quality users compared to the TVL.
Since cryptocurrencies are increasingly integrated into the global financial world, the Algorand Foundation encourages platforms, researchers, investors as well as media, metrics that reflect the actual use and economic demand. This investigation supports the role of Algorand in the development of the cryptom market by combining academic stricts with real-time blockchain views for data-controlled innovation in Web3.
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Information on the Algorand Foundation Algorand has set itself the task of creating a world in which information is integers and scaling innovative ideas. The Algorand Foundation supports the rapidly growing algorand ecosystem by providing a first -class developer environment, supporting key infrastructure and sets technical standards, offers developers and entrepreneurs extensive support and creates the framework for a decentralized administration. You can find more information on algorand.co.
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