Layer-1 is the main foundation of the crypto ecosystem — the place where dApps are built and blockchain activity occurs. But, how do you know if a Layer-1 network is undervalued or overvalued?
Let's break down each important indicator:
#1 Market Cap vs TVL Ratio
This ratio gives us an idea: how much is the network's valuation compared to the value of assets locked within it?
Ratio <1 = could be undervalued
This means, a lot of activity (high TVL), but the market hasn't fully 'valued' it yet.
Example: If chain A has a TVL of $1B but its market cap is only $800M, this could be an opportunity.
#2 Daily User Growth
Growth = adoption.
If the daily active user count rises consistently, that is a strong signal that the network is being used for real, not just speculation.
But what if the coin price hasn't risen yet?
Potentially undervalued.
#3 Metcalfe’s Law
Network value = the square of the number of its users.
This means, the more users there are, the more exponential the value of a network. If the data shows a spike in users, but the price hasn't risen significantly — it could be a hidden gem.
#4 Check the Ecosystem
The more protocols, projects, and developers building on that chain, the greater the potential and value of the network.
Signs: Many grants are being distributed.
Active developers
New projects are born on that chain
If the ecosystem is busy but the market hasn't caught on? Profit can come from there.
Conclusion:
Evaluating Layer-1 is not just about hype. Use data, observe users, assess activity, and see who is building within it.
Find potential before others realize it.
If you have a favorite Layer-1 that you think is undervalued, drop it in the comments!