Does Ecosystem Activity Validate TVL?

Matthew Brigida

Papers from arXiv.org

Abstract: Total value locked (TVL) is widely used to assess decentralized finance ecosystems. Prior evidence finds that portfolios formed on TVL alone are spanned by the crypto market portfolio (Brigida 2025). This paper asks whether TVL becomes more informative when combined with measures of adoption, usage, development, protocol revenue, or social attention. I construct weekly value-weighted 2x3 portfolios that independently sort tokens on TVL-to-market-cap and one of seven ecosystem-activity ratios. Portfolio returns are computed from token prices using lagged-market-capitalization weights and evaluated against crypto market and size factors. Across the available 2022-2025 samples, none of the six on-chain double sorts rejects the benchmark after controlling for multiple testing. The same conclusion holds over 83 common weeks for which social-attention data are available. Several specifications reject at unadjusted levels, but none survives Holm adjustment. The social-attention rejection is only marginal under asymptotic inference and is insignificant under a moving-block bootstrap. Equal-weighted portfolios and formal parameter-stability tests lead to the same broad conclusion. The evidence therefore does not show that ecosystem activity reliably transforms TVL into an incremental return signal.

Date: 2026-10
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