ADJUSTED TVL METRIC HELPS PUT DEFI GROWTH IN PERSPECTIVE

Last updated: June 20, 2025, 00:17 | Written by: Emin Gün Sirer

The world of Decentralized Finance (DeFi) is constantly evolving, offering innovative ways to manage and grow your cryptocurrency assets.One metric frequently touted as a key indicator of a DeFi protocol's success is Total Value Locked (TVL). Total Value Locked (TVL) is one of the most widely used metrics in DeFi. It s often seen as a sign of a protocol s success, but how useful is it really? This week, we re breaking down what TVL measures, its strengths and weaknesses, and how you should use it when evaluating pools and protocols.It’s often seen as a sign of a protocol's popularity and overall health.However, relying solely on TVL can be misleading.Imagine a scenario where the price of a token locked in a protocol doubles.Suddenly, the TVL skyrockets, but does this truly reflect increased usage or adoption? The total value locked in decentralized finance, a measure that tracks the amount of assets committed to the DeFi ecosystem, has soared to $18 billion, according to DeFi Pulse. While the chart may suggest that DeFi adoption is growing, it requires some interpretation to be properly understood. Total value locked is often an imperfect metricOr is it simply a consequence of market fluctuations?This is where the Adjusted TVL metric steps in, offering a more nuanced and realistic understanding of DeFi growth.It attempts to remove the distorting influence of price increases, providing a clearer picture of the fundamental progress occurring within the DeFi ecosystem.In this article, we'll delve deep into the intricacies of TVL, its limitations, and how the Adjusted TVL metric can help you make more informed decisions when navigating the complex world of DeFi.

We'll explore how Adjusted TVL provides a far more grounded perspective by factoring out the impact of surging crypto prices. Called adjusted TVL, the metric attempts to clean total value locked readings from any external influence primarily price increases. Total value locked is often considered a measure ofUnderstanding the distinction between raw TVL and Adjusted TVL is crucial for investors, developers, and anyone looking to gain a genuine understanding of the DeFi space. Crypto Economy s Rise Fuels Defi Sector to Surpass $100 Billion TVL The cumulative value held in decentralized finance (defi) platforms exceeded $100 billion for the first time since May 2025. Crypto EconomyGet ready to learn how to critically evaluate DeFi protocols and identify genuine growth opportunities.

Understanding Total Value Locked (TVL) in DeFi

Let's start with the basics: What exactly is Total Value Locked?In its simplest form, TVL represents the total value of all cryptocurrency assets locked within a specific DeFi protocol or across the entire DeFi ecosystem. TVL stands as a crucial metric for gauging both the size and popularity of the DeFi ecosystem. Moreover, it provides insights into the confidence investors have in various DeFi protocols, acting as a comprehensive indica-tor of market activity.These assets can be anything from stablecoins and cryptocurrencies to liquidity pool tokens and other digital assets.The metric is calculated by summing the USD value of all assets locked in the protocol.

TVL is often seen as a gauge of confidence within the DeFi space. TVL is a critical metric in the DeFi ecosystem, reflecting the total value of assets locked within these protocols. In recent years, TVL has seen significant fluctuations due to market volatility. For instance, in 2025, the TVL in DeFi protocols hit an all-time high of over $250 billion. This demonstrated rapid growth and adoption of DeFiA high TVL generally suggests that users trust the protocol and are willing to commit their assets to it. Market Signal High TVL suggests demand for a protocol s utility or yields. Fundamental Metric Frequently used by analysts and investors as a valuation factor. Use Cases of TVL. Comparing DeFi Platforms Analyze Aave vs Compound based on locked value. Tracking Blockchain Growth Monitor TVL across chains like Arbitrum, EthereumThis, in turn, can indicate a robust and thriving platform.Think of it as a measure of popularity and perceived reliability – the more assets locked, the more attractive the protocol may appear.

Why is TVL important?

Indicator of Market Size: TVL gives you a snapshot of the total capital invested in DeFi, helping you understand the overall size and growth of the industry.
Measure of Protocol Health: A rising TVL can indicate growing confidence in a protocol, suggesting its increasing popularity and utility.
Comparison Tool: TVL allows you to compare different DeFi platforms and assess their relative sizes and market shares.For example, you can analyze the TVL of Aave versus Compound to understand which platform has more locked value.
Signal of Demand: A high TVL can be a signal of strong demand for a protocol's utility, such as lending, borrowing, or yield farming opportunities.

The Problem with TVL: Price Volatility

While TVL is a widely used and seemingly straightforward metric, it's crucial to understand its limitations. ロックされた総価値（TVL）は、多くの場合、DeFiプロトコルとセクター全体の人気の尺度とみなされている。ただし、それを米ドルで換算すると、新しい資産がプロトコルにコミットされていなくても、トークンの価格上昇によってTVLが上昇してしまう。The biggest flaw with relying solely on TVL is its sensitivity to price fluctuations. An important metric has merged called Total Value Locked (TVL). This metric has become pivotal in the DeFi space. What is TVL? Total value locked represents the total value of the cryptocurrency that is currently locked or stored in a DeFi smart contract or application. It is important to remember that TVL is highly affected by price volatility.The TVL metric is denominated in USD.This is great, because it allows us to easily compare different projects, even if they use different coins.But, this dependence on USD also causes problems. TVL is also being used as a metric to measure growth. If the TVL of a platform increases it generally means more money is flowing into the platform, which shows it is growing. Like market caps, the TVL can also be used to represent the total value locked for the entire DeFi space.If the price of the underlying assets locked within a protocol increases, the TVL will also increase, even if no new assets have been added.This creates a misleading impression of growth.

Imagine a DeFi platform with a TVL of $100 million, primarily composed of Ethereum (ETH).If the price of ETH doubles, the TVL will automatically double to $200 million, even if no new users have deposited any additional ETH. Fundamental development isn t that exciting when you don t count in the bullish run.The new metric released by DappRadar aims to show the way the non-centralThis inflated TVL can be misinterpreted as a sign of increased adoption or platform success, when in reality, it's simply a reflection of market forces.

TVL Can Fluctuate Rapidly

DeFi TVL can fluctuate rapidly due to various factors:

Market Forces: As we discussed, price volatility in cryptocurrencies significantly impacts TVL.
Liquidity Issues: Sudden withdrawals of liquidity can cause a sharp drop in TVL.
Exploits and Security Breaches: Negative events like hacks or exploits can lead to a rapid outflow of funds and a decrease in TVL.

Introducing Adjusted TVL: A More Accurate Perspective

To address the limitations of the traditional TVL metric, the Adjusted TVL metric was developed.This metric aims to provide a more accurate representation of DeFi growth by removing the influence of price fluctuations.Several entities, including DappRadar, calculate an Adjusted TVL metric.The core concept behind Adjusted TVL is to fix the prices of the underlying assets to a specific point in time, typically the beginning of the period being analyzed. A Private Investor is a recipient of the information who meets all of the conditions set out below, the recipient: Obtains access to the information in a personal capacity;By holding the prices constant, any changes in the Adjusted TVL reflect genuine changes in the amount of assets locked within the protocol, rather than just price movements.

Let's revisit our earlier example. TVL refers to the total amount of value blocked in defy protocols, stables and other decentralized financial instruments. The concept is crucial in understanding the growth and potential. main points . TVL as a measure of Defi s growth : TVL can be used as a metric to evaluate the health and size of Defi projects. Stablecoins are key playersImagine our DeFi platform with $100 million TVL in ETH.Instead of calculating the TVL using the current price of ETH, the Adjusted TVL calculation would use the price of ETH at the beginning of the analysis period.If the price of ETH doubles during the period, the regular TVL would double to $200 million. Animals and Pets Anime Art Cars and Motor Vehicles Crafts and DIY Culture, Race, and Ethnicity Ethics and Philosophy Fashion Food and Drink History Hobbies Law Learning and Education Military Movies Music Place Podcasts and Streamers Politics Programming Reading, Writing, and Literature Religion and Spirituality Science Tabletop GamesHowever, the Adjusted TVL would remain at $100 million, accurately reflecting that no new assets were actually deposited.

How Adjusted TVL Works: An Example

To illustrate this concept further, consider the following scenario:

Day 1: A DeFi protocol has 100 ETH locked, and the price of ETH is $2,000. Total Value Locked (TVL) is a key metric in the cryptocurrency and DeFi ecosystem, representing the total value of assets locked or committed to decentralized apps (dApps), smart contracts, and blockchain-based protocols. It reflects user trust, liquidity, and platform health.The TVL is $200,000.
Day 30: The same protocol still has 100 ETH locked, but the price of ETH has risen to $3,000. As the summer of DeFi winds down after a stellar few months it is important to put any metric surges into the proper perspective. Using TVL alone to measure the growth of the DeFi sector has been pointed out on a number of occasions by DappRadar as a flawed method and that in fact when it comes to DeFi growth, aTVL or adjusted total valueThe TVL is now $300,000.

In this case, the regular TVL shows a 50% increase, suggesting significant growth.However, the Adjusted TVL, using the initial ETH price of $2,000, would remain at $200,000, accurately reflecting that no new ETH was deposited.

Benefits of Using Adjusted TVL

The Adjusted TVL metric offers several advantages over the traditional TVL:

More Accurate Representation of Growth: By removing the impact of price fluctuations, Adjusted TVL provides a more realistic view of the actual growth in assets locked within a protocol.
Better Comparison Tool: Adjusted TVL allows for a more accurate comparison of different DeFi protocols, as it eliminates the distorting effects of varying asset compositions and price movements.
Identification of True Adoption: Adjusted TVL helps identify protocols that are genuinely attracting new users and assets, rather than simply benefiting from market trends.
More Realistic Perspective: By using Adjusted TVL, you are less likely to be fooled by market volatility. The adjusted TVL metric by DappRadar, which computes total value locked by fixing asset prices to the beginning of the period under scrutiny, can help shed light on what is happening. Adjusted and pure total value locked by DappRadar. The adjusted metric suggests that DeFi has in fact seen very little growth since October 2025.It helps to paint a more honest picture of protocol growth.

Other Metrics to Consider Alongside Adjusted TVL

While Adjusted TVL is a valuable tool, it's essential to consider it in conjunction with other metrics for a comprehensive understanding of DeFi protocols.No single metric can tell the whole story, so it's crucial to look at a variety of factors.

Volume-Adjusted TVL Growth

One interesting metric is Volume-Adjusted TVL Growth. Die Kennzahl namens Adjusted TVL betrachtet die Gesamtheit aller Krypto-Verm gen, die im DeFi angelegt sind, was der g ngigen Kennzahl des Total Value Locked (TVL) entspricht, und bereinigt diese, indem der Kursanstieg der angelegten Krypto-Verm gen herausgerechnet wird.This metric considers both TVL and trading volume.It penalizes TVL growth when the Volume-to-TVL ratio decreases and amplifies growth when the ratio increases. Adjusted TVL metric helps put DeFi growth in perspectiveIn other words, it rewards protocols that are not just attracting assets, but also actively using those assets.

Total Value Redeemable (TVR)

Another useful metric is Total Value Redeemable (TVR). Merkeziyetsiz finans (DeFi) protokollerinde yaşanan patlamayla birlikte TVL: Total Value Locked / Toplam Kilitlenen Değer kavramı sekt r n b y kl ğ n nThis metric is more complex to calculate than the TVL metric.TVR is designed to give a more accurate assessment of the actual value that can be redeemed from a DeFi protocol. See full list on dappradar.comIt takes into account various factors such as fees, impermanent loss, and potential slippage.

Other Important Metrics

Number of Active Users: This metric provides insight into the actual usage and adoption of a protocol.
Transaction Volume: This measures the amount of activity taking place on a platform.
Smart Contract Audits: These are important for assessing the security and reliability of a protocol.
Community Engagement: A strong and active community can be a sign of a healthy and sustainable project.
Yield Rates (APY/APR): While high yield rates can be attractive, it's crucial to understand the risks involved.

How to Use Adjusted TVL in Your DeFi Analysis

Now that you understand the importance of Adjusted TVL, let's look at how you can incorporate it into your DeFi analysis:

Compare Regular TVL and Adjusted TVL: Start by comparing the regular TVL and Adjusted TVL for a protocol. Fundamental growth is not so impressive when you factor out the bull run.If the regular TVL is significantly higher than the Adjusted TVL, it suggests that the growth is primarily driven by price increases.
Track Adjusted TVL Over Time: Monitor the Adjusted TVL over time to identify genuine growth trends.A consistent increase in Adjusted TVL indicates that the protocol is attracting new users and assets.
Compare Adjusted TVL Across Protocols: Use Adjusted TVL to compare different DeFi protocols in a more meaningful way. To address this, a new metric, Volume-Adjusted TVL Growth, was developed and put into action. This metric penalizes TVL growth when the Volume-to-TVL ratio decreases and amplifies growth when the ratio increases. By balancing simplicity and complexity, methodologies can reduce bias and ensure actionable insights.This can help you identify protocols that are truly outperforming their peers.
Consider Other Metrics: Remember to consider Adjusted TVL alongside other metrics, such as the number of active users, transaction volume, and smart contract audits, for a comprehensive assessment.
DYOR (Do Your Own Research): Always conduct thorough research before investing in any DeFi protocol. Related news. Base s Rapid Ascent: 136,000 Daily Users and $175 Million TVL in Ethereum s L2 Defi Space news.bitcoin.com news.bitcoin.comUnderstand the underlying technology, the risks involved, and the team behind the project.

Case Studies: Adjusted TVL in Action

Let's explore some hypothetical case studies to illustrate how Adjusted TVL can provide valuable insights:

Case Study 1: A Lending Protocol

A new lending protocol launches and quickly gains popularity, with its TVL soaring to $500 million within a month.However, upon closer inspection, the Adjusted TVL is only $200 million.This suggests that the rapid growth in TVL is largely due to the price appreciation of the tokens being lent and borrowed, rather than a surge in new users or loan activity.

Case Study 2: A Decentralized Exchange (DEX)

Two competing DEXs have similar TVLs, but their Adjusted TVLs tell a different story. DeFi TVL can fluctuate rapidly due to market forces, liquidity issues, and exploits. Popular DeFi protocols, such as lending platforms and trading platforms, contribute significantly to DeFi TVL. TVL metrics provide a snapshot of the total capital invested in DeFi, offering insights into its growth and stability. High TVL metrics may indicate aDEX A has a higher Adjusted TVL than DEX B, indicating that it is attracting more liquidity providers and generating more trading volume, even after accounting for price fluctuations. That is why people mistakenly started to consider the TVL metric as an unbiased and clear measure that would reflect the strength of a DeFi project. Let s see what is actually behind the term TVL. A breakdown of each letter in T-V-L.This suggests that DEX A is the more actively used and adopted platform.

Common Questions about TVL and Adjusted TVL

What is a good TVL?

There's no single ""good"" TVL, as it depends on the specific protocol, its purpose, and the overall market conditions.A TVL of $10 million might be considered good for a niche project, while a TVL of $1 billion might be expected for a leading DeFi platform.

Is a high TVL always better?

Not necessarily. Explore the flaws of Total Value Locked (TVL) in DeFi and discover Total Value Redeemable (TVR), a new metric for more accurate ecosystem value assessment.A high TVL can be a positive sign, but it's important to consider the factors driving that TVL.Is it due to genuine adoption, or simply price appreciation?Also, a high TVL can sometimes make a protocol a more attractive target for hackers.

Where can I find Adjusted TVL data?

Several DeFi analytics platforms, such as DappRadar, provide Adjusted TVL data.These platforms typically offer comprehensive dashboards and tools for tracking and analyzing DeFi metrics.

The Future of DeFi Metrics

The development and adoption of metrics like Adjusted TVL highlight the ongoing evolution of the DeFi space.As the industry matures, there will likely be further refinements to existing metrics and the emergence of new tools for evaluating DeFi protocols.The goal is to move beyond simple, often misleading metrics like raw TVL and towards a more nuanced and comprehensive understanding of value, risk, and growth within the decentralized finance ecosystem.

Metrics like TVR (Total Value Redeemable) are likely to gain traction as users demand more accurate assessments of their potential returns and risks.Furthermore, expect to see metrics that better incorporate factors like gas fees, impermanent loss, and the overall efficiency of DeFi protocols.

Conclusion: Making Informed Decisions in DeFi

In conclusion, while Total Value Locked (TVL) remains a widely used metric in the DeFi world, it's crucial to understand its limitations.Price fluctuations can significantly distort the TVL, creating a misleading impression of growth.The Adjusted TVL metric offers a more accurate perspective by removing the influence of price movements, allowing you to identify genuine adoption and growth trends.However, Adjusted TVL is just one piece of the puzzle.For a comprehensive understanding of DeFi protocols, it's essential to consider a variety of metrics, including the number of active users, transaction volume, smart contract audits, and volume-adjusted TVL.By combining Adjusted TVL with other relevant data points, you can make more informed decisions and navigate the exciting world of Decentralized Finance with greater confidence.Remember to always do your own research and understand the risks involved before investing in any DeFi protocol.

So, the next time you see a DeFi protocol boasting about its soaring TVL, take a moment to dig deeper.Check the Adjusted TVL, consider other metrics, and ask yourself: Is this genuine growth, or just a reflection of market hype?By asking these questions, you'll be well on your way to becoming a more informed and successful DeFi participant.