Advisory giant Fool analysts have looked into altcoin projects that could comfortably reclaim their former highs in a potential 2023 bull run. Not yet pricing its successful upgrades, this altcoin could be a hidden gem.
Watch out for this altcoin project in the next bull
The cryptocurrency market is seizing all opportunities to rise again in the new year. Most of January altcoin managed to recover in double digits on the monthly time frame. Ethereum (ETH), the choice of fool analysts, is trading again at $1,700, up an astonishing 37.53%. So, is the Ethereum 2023 bull run sustainable?
The answer to this question can be found using one metric: locked aggregate value (TVL). This metric is useful as a shortcut to track how much activity there is on a Blockchain. Generally speaking, the higher the number, the better for a Blockchain. Let’s take a deep dive into this metric and see what analysts have to say about Ethereum’s future prospects.
What is TVL and why is it important?
Total value locked in (TVL), as the name suggests, refers to how much of a cryptocurrency’s supply is “locked”. There are several ways to “lock” your cryptocurrency, such as choosing to join a crypto staking program. With staking, you agree to “lock” coins/tokens that you won’t touch for a long time to earn rewards for a certain period of time. For this reason, blockchains with successful staking programs also often rank very high when it comes to total value locked.
From a long-term investment perspective, you can think of TVL as a way to measure confidence in the future potential of a particular Blockchain. At the very least, you have to trust that the Blockchain will return your crypto funds after the “lock-in” period has expired. Currently, Ethereum is the market leader with $29.23 billion.
TVL to the leading altcoin project
By examining the graph of a Blockchain ranked by TVL, we can immediately see which network is successful in getting investors to “lock” their crypto funds. According to this metric, Ethereum is #1 in the world with a TVL of $29.23 billion. Blockchain #2 is Tron with TVL of $5.35 billion. Taking the big picture, Ethereum is responsible for around 60% of all Blockchain TVL. This weight is a very compelling argument in favor of Ethereum because it means that Ethereum has been very successful in encouraging investors to “lock” their funds and trust in the network.
You can also use TVL with another popular metric, total market capitalization, to get a much more nuanced view of which cryptocurrencies are overvalued and which cryptocurrencies are undervalued. For example, many investors like to divide total market capitalization by TVL to arrive at the price-to-book ratio version of the crypto market. This ratio should be familiar to stock market investors because it is often used to detect stocks that are trading too low compared to their overall intrinsic value.
For example, by dividing Ethereum’s total market capitalization ($204.837 billion) by its TVL ($29.39 billion), we can get a very rough estimate of price/book ratio for Ethereum. When you directly compare Ethereum’s price-to-book ratio with that of its peers, you can immediately see how Ethereum performs relatively. For example, Ethereum has a 6.97 price-to-book ratio, compared to 34.36 for Solana, which is up more than 100% in 2023. With the market getting too bubbly and speculative for Solana, he has some room to run as part of a bull market rally.
How can an investment thesis be developed for Ethereum?
The final step in using TVL to evaluate Ethereum is to come up with an investment thesis based on where funds are moving on Ethereum. Using a website like DeFi Llama, it’s possible to see exactly which decentralized finance (DeFi) protocols are attracting the most action. For example, the best DeFi protocol for Ethereum includes staking. This makes sense, as Ethereum launched staking as part of Merge last year.
You can also find that one of the best staking protocols includes Coinbase Global. It seems that Coinbase is having relative success in persuading its customers to stake Ethereum directly on its platform. Taken as a whole, Ethereum’s success in staking should be a clear positive for its long-term growth potential.
As a long-term investor in Ethereum, you may decide to follow TVL for a long time to see which areas are growing. This can alert you to developments that are still under the radar for many investors.
TVL is useful, but not perfect
TVL can be a very useful metric. It can help you detect when a cryptocurrency is undervalued and let you see how a particular network compares to its peers. Finally, it may allow you to put real numbers on some of the hype and speculation you may see in the media. For example, before Merge, many analysts overstated the importance of staking for Ethereum. Well, after a few months, it looks like he was right. Looking at TVL, it seems that staking is very important to Ethereum.
Admittedly, TVL is not a perfect metric, and there are plenty of analysts who argue that the number really needs to be cleared and cleared in order to be used with any accuracy. However, based on my own TVL analysis, I’m still bullish on Ethereum in the long run.
Ethereum (ETH), which Fool analysts expect to boom in the 2023 bull, plans to complete a number of major upgrades in the transition to PoS over the course of the year. As Kriptokoin.com, we have included the dates and details for the Shanghai fork in this article.
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