Loopring Mcap/TVL Ratio: What Is It And What It Means For LRC's Price

Loopring, an Ethereum Network-based cryptocurrency, has had a great year, claiming a new all-time high at $3.83 on Nov. 10. However, things are not looking so well now for the Loopring (LRC) token as the total value locked, or TVL which represents the sum of all assets deposited in decentralized finance (DeFi) protocols, has started dropping for the protocol.

Loopring was designed for building decentralized exchanges and due to its low gas fees and faster transaction speed, the hype took the token to new highs. But an asset cannot remain bullish forever and it seems that the hype surrounding LRC is about to die down.

Data from DeFiLlama shows that the TVL for the token reached an all-time high on Nov. 25 at $785 million. Since then, the TVL has been dropping and as of Monday, it is at $593 million. At the same time, data from CoinGecko shows that the current market capitalization of the token is $3.05 billion.

The market cap-to-TVL ratio, as per CoinGecko, is 5.15, which is very high as compared to those of other tokens like Ethereum, whose ratio is around 3 (market cap $480 billion and TVL is $160 billion). This ratio is what tells us that LRC is highly overvalued at the moment.

And the overvaluation of the project is what suggests that the holders of the token might be in for a bumpy, bearish ride ahead.

Looking at the price action of the token, the data shows that the token is up by 20.8% in the last 7 days, while down by 16.5% in the last 14 days. But, interestingly, the LRC token is up 1275.9% in the last one year.

However, what's important to note is the monthly candle for December is bearish and down 12% as compared to the previous month. LRC is 34.6% down from its all-time high, another indicating of sluggishness.