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 capital, but research shows much of that liquidity is mercenary rather than sticky. TVL rises, then evaporates — a pattern that undermines trust in the metric's durability.

_{TVL by chain | Source: European Banking Authority}

_{"An increase in ETH price typically boosts investor interest in DeFi, and vice versa."}

Stablecoin issuance reveals what TVL can't

Stablecoins give a far cleaner picture of crypto's liquidity engine. Unlike TVL, which can swell without a single dollar entering the system, stablecoin supply growth requires actual issuance. Someone has to mint USDT, USDC or their algorithmic equivalents. That mint represents real capital choosing to enter crypto rails.

In 2025, this data is especially revealing for three reasons.

1. Stablecoin issuance front-runs risk appetite. Net new mints tend to precede periods of heightened trading activity, liquidity expansion, and increased leverage. When billions of fresh stablecoins hit exchanges and DeFi markets, it usually means capital is positioning for an upside or hedging against volatility.
2. The stablecoin supply has broken its previous cycle high. TVL didn't. While many DeFi platforms remain healthy, the cumulative TVL has struggled to regain its 2021 highs. Stablecoins have beaten their previous high-water mark this year, suggesting that inflows returned even while DeFi's headline metric lagged.
3. Stablecoins are becoming the rails for the entire crypto economy. In 2025, stablecoins underwrote everything — liquidity on centralized exchanges, lending, leverage on perpetuals, and collateral flows across L2s. A growing supply doesn't just indicate adoption. It amplifies the entire market's capacity to transact.

This is why analysts increasingly describe stablecoins as crypto's equivalent of broad money supply (M2). They're not just instruments; they're the liquidity layer.

Crypto is entering a phase where liquidity beats narratives. Without inflows, nothing sticks. It's a simple dashboard — when stablecoin supply expands, markets tend to firm up. When supply contracts, risk premiums widen and speculative activity cools.

For analysts and investors, this creates a more disciplined way to interpret market sentiment. It also helps separate structural growth from noise. When a new L2 posts a sudden TVL spike, the first question should be ‘where did the dollars actually come from?' If stablecoin supply hasn't moved, the answer is usually ‘nowhere new'.

TVL has become context, not signal

To be fair, there's still value in TVL as a map of capital allocation. It shows which ecosystems retain liquidity, which protocols have sticky deposits, and which sectors attract longer-duration positioning. The market no longer treats it as a leading indicator.

Going forward, the market is settling into a clearer hierarchy of on-chain indicators. At the top sits stablecoin net issuance, which reveals genuine inflows, outflows, and the overall liquidity tide. Next come CEX & DEX volumes, the most direct read on market activity and speculative appetite, followed by Perpetuals funding rates, which signal how traders are positioned and how much leverage is being pulled into the system.

L2 throughput rounds out the picture by showing user activity and settlement demand. And finally there's TVL – but increasingly treated as a capital allocation snapshot, not an inflow metric.

TVL may live on, but its predictive powers have waned. Stablecoin issuance provides a cleaner, more objective signal of real demand in a market increasingly shaped by liquidity flows.

Markets are unsettled. If you want to know where crypto is heading next, watch the mint button.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.