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Evaluating the Significance of the Total Value Locked to Market Capitalization Ratio

Author

Listed:
  • Konstantinos Pantelidis
  • Ioannis Karakostas

Abstract

This study investigates the impact of the total value locked to market capitalization (T/M) ratio on the returns of four major cryptocurrencies, using daily data spanning from March 2021 to June 2024. Employing a GARCH (Generalized Autoregressive Conditional Heteroskedasticity) model, the analysis reveals a significant negative relationship between the T/M returns and the returns of the corresponding cryptocurrency. In contrast, the T/M ratio differences of peer tokens exhibit a positive relation with the returns of the analyzed cryptocurrency. These findings suggest that the T/M ratio dynamics are crucial in influencing token performance, offering new insights into the interconnected behavior of digital assets within the broader cryptocurrency market.

Suggested Citation

  • Konstantinos Pantelidis & Ioannis Karakostas, 2024. "Evaluating the Significance of the Total Value Locked to Market Capitalization Ratio," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(11), pages 1-41, November.
    • Handle: RePEc:ibn:ijefaa:v:16:y:2024:i:11:p:41
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    References listed on IDEAS

    as
    1. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    2. Maouchi, Youcef & Charfeddine, Lanouar & El Montasser, Ghassen, 2022. "Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs," Finance Research Letters, Elsevier, vol. 47(PA).
    3. Şoiman, Florentina & Dumas, Jean-Guillaume & Jimenez-Garces, Sonia, 2023. "What drives DeFi market returns?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    4. Bhambhwani, Siddharth M. & Huang, Allen H., 2024. "Auditing decentralized finance," The British Accounting Review, Elsevier, vol. 56(2).
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    Citations

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    Cited by:

    1. Matt Brigida, 2025. "The Surprising Irrelevance of Total-Value-Locked on Cryptocurrency Returns," Papers 2506.03287, arXiv.org, revised Jun 2025.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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