Investing in cryptocurrencies is as risky as it can get in 2022. But it’s even more difficult to zero down on Defi projects that you believe and have trust in. With so many promising Defi projects going down in recent times, investor sentiment is in a very bad place.
Before investing in any Defi project, it’s important that we thoroughly examine what its figures and stats look like. While stats do not guarantee anything in the crypto space, it’s important to analyze them before investing hard-earned money.
The commonly noticed statistical markers that investors see are total and circulating supply, trading volume, and market capitalization. But there’s another important marker that everyone should pay attention to — TVL, or total value locked.
To put it in simple words, total value locked refers to the total worth of assets in a Defi protocol. Various factors go into the calculation of total value locked, like the highest available circulating supply, the current price of cryptocurrencies, and the projection of the Defi project’s supply.
At present, the aggregate TVL of Defi projects globally is more than $2 billion, which has grown from $400 million two years ago. While a high TVL figure generally means that a Defi project is doing good, it’s not a conclusive metric. More importantly, you should be careful of projects that have a low TVL but offer high yields.
While TVL is an important marker, it’s not the only one. Study a Defi project from every angle before deciding to invest in it or not.
