Lido DAO, Renzo and Marinade Have the Biggest TVL/Market Cap Disparity – Here’s What It Means

Key Takeaways

• Lido DAO leads all protocols in TVL but has broken down from a long-term support trend line.
• REZ has fallen since its launch, dropping to a new all-time low price on May 14.
• Marinade fell to a new all-time low on May 1, but shows signs of a potential bullish trend reversal.

While TVL is not necessarily directly related to the market cap of a token, it does have a positive correlation, especially in decentralized finance (DeFi), since it is seen as a sign of security and value.

The higher the amount of staked assets, the more secure the protocol is. On top of this, it is also important to look at activity levels, so the TVL is not created by a small number of investors and a sign of centralization.

Three crypto protocols with a notable discrepancy between their Total Value Locked and market capitalization are Lido DAO, Renzo and Marinade, though their price movement is not indicative of this divergence.

Protocols With TVL – Market Cap Disparity

There are some protocols whose market capitalization diverges notably from their TVL. For example, the lending protocol JustLend has a TVL of $6 billion, while its native token JST has a market capitalization of $312 million. In this case, the TVL is nearly 20 times higher than the market capitalization of its native token.

For comparison, the lending protocol Aave has a TVL of $10.56 billion, while its native token AAVE has a market capitalization of $1.2 billion, a ratio of less than nine.

Decentralized exchanges usually have a smaller difference between their TVL and market capitalization. Uniswap has a TVL of $5.4 billion and market cap of $4.1 billion, a ratio of 1.3. Aerodrome finance has TVL of $600 million to a market capitalization of $400 million for a ratio of 1.5.

TVL/Market Cap Disparity: The Biggest Scores

In liquid staking, Marinade has $1.5 billion TVL but only $40 million market cap for a ratio of 39. This is the biggest ratio from the top 50 protocols with the highest TVL. Interestingly, Lido DAO, which leads all protocols in TVL at $27 billion, has a market cap of only $1.4 billion, for a ratio over 19.

The second largest leading liquid staking protocol on Ethereum, Rocket Pool, has a TVL of $3.52 billion and a market cap of $393 million, a ratio of nine.  Jito has a TVL of 1.55 billion while the native token has a market cap of $500 million, a ratio of three.

Finally, Liquid Restaking protocol Renzo has a TVL of $3 billion and a market cap of $130 million, a value of 23. This leads to the hypothesis that liquid staking/restaking protocols and lending protocols have a more notable TVL – market capitalization divergence compared to decentralized exchanges.

Out of the biggest protocols, the ones with the biggest TVL – market capitalization disparity are Marinade, Renzo and Lido DAO. JustLend only narrowly misses the cut, with a disparity 0.1 less than Lido DAO .

LDO Breaks Down From Long-Term Support

The LDO price has fallen since its all-time high of $4.04, reached on January 8. It created a lower high and several long upper wicks in March before accelerating its downward movement.

Even though the price initially bounced at a long-term ascending support trend line, it broke down from it last week. At the time, the trend line had existed for nearly 700 days. More specifically, the trend line has been in place since the entire upward movement started in June 2022.

So, its breakdown is the most significant bearish sign in LDO’s price history. On top of this, LDO broke down from the 0.618 Fibonacci retracement support level at $1.78.

There is a horizontal support area at $1.50. If LDO breaks down below it, it could fall to the next support at $0.95. The weekly RSI is below 50 and falling, both signs of a bearish trend.

REZ Trades at an All-Time Low

The native token of Renzo has fallen since its launch on April 30. Since May 3, the decrease has been contained inside a descending parallel channel. These channels usually contain corrective movements.

However, REZ trades in the lower portion of the channel and fell to a new all-time low of $0.110 on May 14. While there is bullish divergence in the two-hour RSI (green), there are no other positive signs.

If the decrease continues, REZ can fall to the channel’s support trend line at $0.100. Conversely, moving above the channel’s midline can trigger an increase to the resistance trend line at $0.13.

Currently, there are no signs pointing to this being the most likely outcome.

MNDE Price Can Begin a Bullish Trend Reversal

Similarly to the other two, the MNDE price action is not bullish. MNDE has fallen 70% since its March 18 high, culminating with a new all-time low price of $0.135 on May 1.

However, unlike the other two, there are signs for a potential bullish trend reversal in place. More specifically, both the RSI and MACD have generated bullish divergences (green lines). Such divergences often precede bullish trend reversals.

Despite these signs, the price action does not show any strength yet. To the contrary, MNDE is falling under a descending resistance trend line. In addition to this, it declined below the $0.155 horizontal area.

As a result, the trend cannot be considered bullish until MNDE breaks out from both these resistances. In that scenario, the next resistance would be at $0.22.

TVL – Market Cap Disparity Will Not Always Converge

A marked discrepancy between the TVL of a protocol and its market cap is seen as a gauge of value. As a result, when the TVL is considerably higher than the market capitalization, the prevailing notion is that the protocol is undervalued. However, the case of LDO illustrates that this gap can persist without market cap aligning with TVL.

Recent examples like Renzo and Marinade echo this trend. They have both fallen to new all-time lows despite a significant increase in TVL and no notable emissions.

So, while TVL is important, and a higher TVL is a sign of a more valuable and secure protocol, a high TVL to market cap ratio does not guarantee convergence, providing a stark reminder that there are numerous other factors that influence valuation.

About the Author

Valdrin Tahiri

Valdrin discovered cryptocurrencies while getting his MSc in Financial Markets from the Barcelona School of Economics in 2017. He has been an avid investor and trader since. Valdrin has written for several cryptocurrency media companies such as BeInCrypto and CoinGape.

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