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Challenging Conventional Metrics in Cryptocurrency Investment

In a landscape rife with metrics aimed at guiding investment decisions in cryptocurrencies, the Total Value Locked (TVL) has long held a prominent place. However, a recent study conducted by the Algorand Foundation's tokenomics team has raised significant questions about the utility and reliability of TVL as a benchmark for investment performance.

Published on June 10, 2025, the report authored by Dr. Matthew Brigida, an Associate Professor of Finance at SUNY Polytechnic Institute and Chief Economist at Algorand Foundation, suggests that TVL may not be the reliable indicator many industry analysts believe it to be.

The Core Findings of the Study

The team's analysis encompassed more than 300 cryptocurrencies (excluding Bitcoin and stablecoins) over the period from 2023 to 2024. Their foremost conclusion: TVL fails to effectively predict the performance of various tokens. Throughout their study, the researchers constructed weekly portfolios classified based on each token's TVL. They retained the top 25% and short-sold the bottom 25% but found that these strategies yielded no abnormal returns. This conclusion challenges the common narrative that higher TVL correlates with greater credibility or growth potential for a cryptocurrency.

Dr. Brigida emphasized that while TVL is frequently used to signify a project’s credibility, the study results suggest the opposite: “Our findings illustrate that TVL does not serve as a reliable investment signal.” Even with adjustments made for common issues like double counting, portfolios based on TVL did not exhibit abnormal returns. Such conclusions cast a shadow over the utility of this often-cited metric.

The Pitfalls of Relying on TVL

Despite TVL being a staple in many media discussions surrounding cryptocurrencies, the report warns that it can mislead both investors and analysts. Some platforms, such as Messari, Artemis, and Token Terminal, have begun relegating TVL to a secondary metric, while Blockworks has introduced a measure called Real Economic Value (REV) to better capture economic reality. Other analytical tools, including Dune and L2BEAT, focus on decentralizing the interpretation of TVL or use alternative evaluations like Total Value Secured (TVS).

Nansen has taken a novel approach by adding insights into user wallet behavior and smart money flows, while Flipside Crypto emphasizes the value generated by high-quality users over mere TVL metrics.

The Call for Better Metrics

As cryptocurrencies become further entrenched in the global financial landscape, the Algorand Foundation urges researchers, investors, and media outlets to optimize their focus towards metrics that genuinely reflect real utilization and economic demand. This research underscores Algorand's commitment to transforming the cryptocurrency market by merging academic rigor with real-time blockchain insight, thus fostering data-driven innovation in the Web3 era.

The complete press release and a detailed white paper are available for those wishing to delve deeper into the research findings.

About the Algorand Foundation

The mission of Algorand is to empower an ecosystem where information is trustworthy and innovative ideas can flourish. The foundation supports the fast-growing Algorand ecosystem by providing a world-class development environment, backing vital infrastructure, establishing technical standards, and facilitating decentralized governance. For more information about their initiatives, please visit algorand.co.

This study could pave new pathways for understanding investment strategies in the cryptocurrency world, aligning them more closely with actual economic activities rather than relying heavily on potentially misleading metrics.