Loopring (CCC: LRC-USD) is a decentralized marketplace system centered on Ethereum (CCC: ETH-USD).
LRC-USD has lately made much higher progress than the effect of its usefulness to its consumers. Nevertheless, it has probably risen too far and is due for a significant drop.
A metric called the Total Value Locked is one approach to assessing this utility (TVL). This is the total amount of money users have put into decentralized finance (DeFi) apps centered on that coin.
Individuals can put their money on the line or store their crypto in wallets depending on it. As a result, although the crypto value can be removed from the staking contracts and wallets, it is termed frozen in that cryptocurrency. As a result, TVL has evolved into a metric for determining the acceptability of a virtual currency.
For blockchain systems and non-fungible tokens, DefiLlama.com is the ideal place to keep track of TVL (NFTs). As per DefiLlama, on December 5, 2021, Loopring presently has a TVL of $518.8 million. This has dropped from the high of $786 million, reached on November 25.
Furthermore, at a price of $2.02 for LRC-USD on December 5, Loopring currently has a market valuation of $2.68 billion. That means Loopring’s significance as blockchain technology is five times that of cryptocurrency. This may be shown by dividing the $2.68 billion market valuation by the $518.8 million TVL.
This is, nevertheless, an extremely high metric. For instance, Ethereum’s market valuation is just three times that of its TVL. This is the case since its market capitalization is $499.2 billion and its TVL is 164.67 billion.
Other DeFi-related cryptocurrencies have lower market cap-to-TVL ratios. For instance, Avalanche (CCC: AVAX-USD), for instance, has a market valuation of $20 billion but a TVL of $11.96 billion. This results in a low ratio of 1.67 times.
As a result, with a five-to-market-cap-to-TVL ratio, Loopring likely overprices at this moment.
Since the end of October, the number of people using Loopring has increased considerably. On Oct. 27, for instance, it was selling for only 38 cents. Then it soared to a high of $3.69 per LRC-USD token in November. It’s now $2.02, a far cry from its high, though it’s 5.3 times what it was at the end of October.
When there is such a large profit, many people rush to take advantage of it. That’s exactly what’s going on here. Loopring is now worth $2.02, a 45 percent decrease from its peak.
Given its extremely high market cap/TVL ratio, I believe it might drop another 50%. That would give it a 2.5-to-1 ratio, which would be more in tune with other DeFi cryptos. This requires, nevertheless, that the TVL number remains constant.
As a result, investors should avoid investing in this risky and highly volatile cryptocurrency. They should at the very least hold off on investing in it until there is some type of rational basis for it.
Its market capitalization is far too large in comparison to the cryptocurrency’s underlying TVL.
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