TVL-to-Market Cap Ratio

The TVL-to-Market Cap ratio is a valuation metric used to assess whether a DeFi protocol's governance token is overvalued or undervalued relative to the amount of capital locked in its ecosystem. A low ratio may suggest that the token price has not kept pace with the protocol's growth, potentially indicating a buying opportunity.

Conversely, a high ratio might signal that the token is priced for growth that has not yet materialized in the form of TVL. While this metric is a useful starting point, it must be used with caution, as it does not account for differences in revenue generation, tokenomics, or market narrative.

It is one of many tools used in fundamental analysis to evaluate the value accrual potential of a project.