KoinlyticsThree of the most-quoted numbers in crypto are also three of the most-abused. TVL, market cap, and FDV each measure different things, and confusing them leads to bad decisions.
TVL: Total Value Locked
The dollar value of assets deposited in a protocol's smart contracts. High TVL means users trust the protocol enough to leave money in it. Watch out for:
- Double counting. LSTs, LRTs, and looped positions get counted at every layer.
- Inflation from the protocol's own token. If UNI is the collateral, UNI going up inflates TVL without any new deposits.
- Mercenary TVL. Yield farms attract capital that leaves the day incentives stop.
Market cap
Circulating supply �- price. What the market values the currently-tradeable tokens at. This is the number most sites lead with.
FDV: Fully Diluted Valuation
Total supply �- price. What the market would value the project at if every locked token were released today. FDV > market cap means a lot of supply is still locked. FDV = market cap means nothing is locked.
The ratios that matter
- FDV / Market cap. If this is 5, only 20% of tokens are circulating. Massive upcoming dilution.
- TVL / Market cap. Rough sense of how much value the market is paying per dollar of usage. Uniswap has traded 0.1-0.5 historically. Aave 0.3-1.0. New projects launch with ratios above 10 and then compress.
- P/S (Price / Sales). Market cap / annualized protocol revenue. Directly comparable to traditional stocks. Aave, Uniswap, and MakerDAO have this data on Token Terminal.
What each metric fails at
- TVL fails at: measuring real user activity (bot volumes inflate it), differentiating incentivized vs organic capital.
- Market cap fails at: revealing dilution, showing free float (huge multisig holdings distort it).
- FDV fails at: projects with elastic supply (uncapped emissions).