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.

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