TVL Is Dead. Stablecoin Issuance Is The Only Metric That Matters
For years, Total Value Locked (TVL) has been the canary in DeFi’s coalmine. When it was up, the sector was ‘thriving’. When it was down, DeFi was ‘in decline’. During 2025, that narrative began to crumble.
TVL still moves, but it no longer reveals what it once did, and the market has largely stopped treating it as a leading indicator. That happened because the structure of crypto changed faster than its metrics.
Today, the figure that smart investors and onchain analysts increasingly look to for a genuine signal isn’t TVL at all. It’s stablecoin issuance for USDT, USDC, and new programmatic dollars, such as USDe.
The reason is simple — you can’t fake net new mints. In a market where liquidity drives everything from memecoin rotations to L2 throughput, stablecoin supply growth increasingly functions like crypto’s broad-money indicator.
A signal degraded
At its best, TVL was a solid proxy for the amount of capital DeFi could attract. In practice, it became something very different, and very flawed.
TVL is structurally inflated by token prices. When ETH runs, TVL often follows suit, even if no new capital is introduced. The correlation is so tight that, in some weeks, the ETH chart could effectively serve as a proxy for DeFi’s entire adoption metric. It’s a price-reactive statistic, rather than a predictive one.
TVL ballooned thanks to recursive loops. Liquid staking tokens (LSTs), liquid restaking tokens (LRTs), and leverage spirals allow the same collateral to be double- and triple-counted across protocols. A single ETH can appear multiple times in sector-level TVL snapshots, depending on how many times it is rehypothecated. The nominal number may increase, but the underlying liquidity remains unchanged.
Incentives distort TVL more than they used to. From L2 airdrop farming to high-APR liquidity campaigns, short bursts of inflationary reward frequently draw in speculative …
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