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What Ethereum’s Declining Total Value Locked (TVL) Means for Investors and DeFi Enthusiasts

Declining, DeFi, Enthusiasts, Ethereums, Investors, Locked, Means, Total, TVL

“What Ethereum’s declining Total Value Locked (TVL) means for you: Unveiling potential opportunities amidst market shifts.”



Is Ethereum still the king of Proof of Work (PoW) networks? The answer is not as straightforward as one might expect. While Ethereum is still the leading PoS network on paper, there are some factors that suggest its dominance might be challenged.

One important metric to consider is Total Value Locked (TVL), which measures the amount of value locked in a network. Ethereum has been the leading network in terms of TVL, but recently it has been declining and might be overtaken soon. On-chain data shows that Ethereum’s TVL has fallen from its yearly high to a 12-month low.

The decline in Ethereum’s TVL is not too concerning, as it is largely due to low activity during the crypto winter. However, it does signal a growing probability that Ethereum’s dominance in the altcoin segment might soon be flipped. One network that seems to be a top contender to challenge Ethereum’s dominance is Tron. At press time, Tron’s TVL has been growing rapidly while Ethereum’s TVL has been dipping towards new yearly lows.

While the decline in TVL might raise some concerns, Ethereum has been growing in other aspects. For example, the network’s Supply in Smart Contracts and ETH 2.0 Total Number of Deposits have been achieving positive growth and recently reached new historic highs. This indicates that Ethereum has been experiencing healthy utility despite the market’s cool down.

The correlation between Ethereum’s price action and TVL outflows suggests that the cryptocurrency’s bearish performance could explain why the TVL has been shrinking. It also suggests that we could see the TVL embark on a recovery during bullish phases.

In conclusion, Ethereum’s position as the king of PoW networks might be challenged as its TVL declines and other networks like Tron gain momentum. However, Ethereum’s growth in other aspects indicates that it still has strong utility. Traders should keep an eye out for a recovery in Ethereum’s TVL once the crypto winter is over.

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