New Algorand Foundation Study Challenges Popular Crypto Metric Total Value Locked
In the evolving landscape of cryptocurrency, the metrics we utilize to gauge success and potential opportunity are crucial. However, a recent study from the Algorand Foundation casts serious doubt on one of the industry's most cited indicators: Total Value Locked (TVL). This research, led by Dr. Matthew Brigida, an Associate Professor of Finance at SUNY Polytechnic Institute and Chief Economist at Algorand Foundation, scrutinizes the relevance of TVL and its ability to accurately predict the performance of cryptocurrencies.
The study focuses on data accrued from over 300 cryptocurrencies, excluding Bitcoin and stablecoins, during the period from 2023 to 2024. The primary conclusion drawn is stark: despite TVL's ubiquitous presence in conversations about crypto investments, it fails to translate into actual financial performance and can mislead investors.
Dr. Brigida's team constructed weekly portfolios that ranked tokens based on their TVL metrics. They tested these portfolios against the conventional wisdom that higher TVL can lead to better investment performance by holding the top 25% of tokens and shorting the bottom 25%. Their results revealed that portfolios based solely on TVL did not yield any abnormal returns.
"TVL is often used to project credibility or potential profitability, but our findings illustrate its inadequacy as a reliable investment signal," remarked Brigida. He further noted that even once adjustments for known issues, like double counting, were made, TVL-based strategies continued to underperform.
Despite its frequent prominence in crypto media, there are warnings that investing based on TVL can be misleading. Notable platforms such as Messari, Artemis, and Token Terminal are now treating TVL as a secondary metric, favoring alternatives like Blockworks REV (Real Economic Value) instead. Furthermore, community analytical tools, including Dune and L2BEAT, have begun to decentralize the interpretation of TVL, emphasizing metrics like Total Value Secured (TVS). Other analytics services, such as Nansen, complement TVL by focusing on wallet behavior and smart money flows, while Flipside Crypto stresses the importance of user quality over TVL figures.
As the cryptocurrency sector integrates deeper into the global financial framework, the Algorand Foundation encourages platforms, researchers, investors, and media outlets to adopt metrics that better reflect real usage and economic demand. The findings from this rigorous study not only underscore Algorand's commitment to innovation but also highlight its role in shaping the future of the cryptocurrency market by combining academic principles with real-time blockchain insights.
To read the comprehensive press release, click here. The full white paper can be accessed here.
About Algorand Foundation: Algorand aims to create a world where information is trustworthy and innovative ideas are scalable. The foundation supports the growing Algorand ecosystem by offering a top-tier developer environment, infrastructure for key projects, and establishing technical standards, while providing extensive support for builders and entrepreneurs, along with a framework for decentralized governance.
The study focuses on data accrued from over 300 cryptocurrencies, excluding Bitcoin and stablecoins, during the period from 2023 to 2024. The primary conclusion drawn is stark: despite TVL's ubiquitous presence in conversations about crypto investments, it fails to translate into actual financial performance and can mislead investors.
Dr. Brigida's team constructed weekly portfolios that ranked tokens based on their TVL metrics. They tested these portfolios against the conventional wisdom that higher TVL can lead to better investment performance by holding the top 25% of tokens and shorting the bottom 25%. Their results revealed that portfolios based solely on TVL did not yield any abnormal returns.
"TVL is often used to project credibility or potential profitability, but our findings illustrate its inadequacy as a reliable investment signal," remarked Brigida. He further noted that even once adjustments for known issues, like double counting, were made, TVL-based strategies continued to underperform.
Despite its frequent prominence in crypto media, there are warnings that investing based on TVL can be misleading. Notable platforms such as Messari, Artemis, and Token Terminal are now treating TVL as a secondary metric, favoring alternatives like Blockworks REV (Real Economic Value) instead. Furthermore, community analytical tools, including Dune and L2BEAT, have begun to decentralize the interpretation of TVL, emphasizing metrics like Total Value Secured (TVS). Other analytics services, such as Nansen, complement TVL by focusing on wallet behavior and smart money flows, while Flipside Crypto stresses the importance of user quality over TVL figures.
As the cryptocurrency sector integrates deeper into the global financial framework, the Algorand Foundation encourages platforms, researchers, investors, and media outlets to adopt metrics that better reflect real usage and economic demand. The findings from this rigorous study not only underscore Algorand's commitment to innovation but also highlight its role in shaping the future of the cryptocurrency market by combining academic principles with real-time blockchain insights.
To read the comprehensive press release, click here. The full white paper can be accessed here.
About Algorand Foundation: Algorand aims to create a world where information is trustworthy and innovative ideas are scalable. The foundation supports the growing Algorand ecosystem by offering a top-tier developer environment, infrastructure for key projects, and establishing technical standards, while providing extensive support for builders and entrepreneurs, along with a framework for decentralized governance.
Topics General Business）
【About Using Articles】
You can freely use the title and article content by linking to the page where the article is posted.
※ Images cannot be used.
【About Links】
Links are free to use.