Study shows that Total Value Locked (TVL) is a poor metric for building crypto portfolios and making investment decisions
SINGAPORE – June 10, 2025 – A new study from the Algorand Foundation’s tokenomics team challenges one of the cryptocurrency sector’s most widely cited metrics: Total Value Locked (TVL). The report provides some of the strongest evidence to date that TVL, despite its prominence across dashboards, headlines, and investor materials, has no bearing on a token’s financial performance.
Previous researchers have found that TVL is inflated. Many protocols count the same funds multiple times, skewing perceived usage and overstating the metric’s legitimacy. Now, in a comprehensive analysis of over 300 cryptocurrencies from 2023–2024 (excluding bitcoin and stablecoins), researchers found no evidence that TVL is predictive of token performance. The study was led by Dr. Matthew Brigida, Associate Professor of Finance at SUNY Polytechnic Institute and Chief Economist at the Algorand Foundation.
The research team constructed weekly portfolios that ranked tokens by TVL, holding the top 25% and shorting the bottom 25%, to test whether high-minus-low TVL portfolios generated alpha. They did not.
“TVL is often used to project credibility or potential upside, but our results show it fails as an investment signal,” said Brigida. “Even after adjusting for known issues like double-counting, TVL-based portfolios didn’t deliver abnormal returns.”
Key findings
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- No outperformance from high-TVL tokens: Portfolios that ranked coins based on TVL and held the top quartile while shorting the bottom did not have significant returns when controlling for market movements.
- Market factors explain returns: Once broader crypto market performance is accounted for, TVL offers no additional insight into returns.
- Need for better metrics: The study calls on analysts and developers to construct alternative measures of confidence in DeFi platforms, possibly based on user-centric indicators like wallet activity or unique participants.
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TVL continues to be used in headlines in all crypto media, but the paper warns that this practice can be misleading for both investors and analysts. Platforms like Messari, Artemis, and Token Terminal now treat TVL as a secondary or contextual indicator, while Blockworks has introduced REV (Real Economic Value). Community-led analytics tools such as Dune and L2BEAT have also responded, either decentralizing the interpretation of TVL or replacing it with more inclusive metrics like Total Value Secured (TVS). Nansen complements this shift by contextualizing TVL with wallet-level behavior and smart money flows, offering a more nuanced view of protocol activity and capital movement. Flipside Crypto reinforces this evolving perspective by treating TVL as a secondary metric, emphasizing instead on the value generated by high-quality users.
As crypto integrates more deeply with global finance, the Algorand Foundation urges platforms, researchers, investors and media to adopt more metrics that reflect real usage, value flow and economic demand.
With this research, Algorand Foundation reinforces its contribution to advancing the evolution of the crypto market, merging academic rigor with real-time blockchain intelligence to shape the future of data-driven innovation and analytics in Web3.
The full whitepaper is available here.
About Algorand Foundation
Algorand’s mission is to power a world where information has integrity and innovative ideas can scale. The Algorand Foundation supports Algorand’s rapidly growing ecosystem by providing a best-in-class developer environment, supporting key infrastructure and setting technical standards, offering comprehensive support to builders and entrepreneurs, and providing the framework for decentralized governance.
Launched in 2019, the Algorand (ALGO) blockchain has grown into a vibrant ecosystem of developers, entrepreneurs, and enterprise partners that benefit from institutional-grade certainty and resilience. Its low fees, instant finality, and minimal carbon footprint appeal to the protocol's millions of retail users, and developers of all kinds appreciate the ability to use common programming languages like Python and TypeScript. Builders on Algorand are creating protocols and companies that solve important problems at a global scale: instant payments in war and disaster zones, self-sovereign identity for the disenfranchised, supply-chain traceability for global commerce, permissionless protocols addressing financial inclusion, and the creation of entirely new markets through tokenization, to name a few. To learn more and start your journey on Algorand, visit algorand.co
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