What does TVL actually reflect?
TVL is calculated based on the market prices of assets, so changes in asset prices alone can cause TVL to fluctuate, even when no funds flow in or out.
Many protocols on Ethereum have large amounts of ETH or ETH-derived tokens locked up, so fluctuations in the price of ETH directly affect the TVL of those protocols.
The coin mentioned above: $ETH is currently priced at 2562, up 2.11% in 24h.
Understanding the mechanics can help you avoid some pitfalls, but it can’t replace risk management.
TVL is calculated based on the market prices of assets, so changes in asset prices alone can cause TVL to fluctuate, even when no funds flow in or out.
Many protocols on Ethereum have large amounts of ETH or ETH-derived tokens locked up, so fluctuations in the price of ETH directly affect the TVL of those protocols.
The coin mentioned above: $ETH is currently priced at 2562, up 2.11% in 24h.
Understanding the mechanics can help you avoid some pitfalls, but it can’t replace risk management.