How Does an Increase in TVL Affect the Supply-Side Dynamics of a Token?

An increase in TVL often requires users to stake or lock the protocol's native token or other assets, which effectively removes them from the circulating supply. This reduction in available supply, assuming constant or rising demand for the protocol's services, creates a deflationary pressure on the token's price.

This positive supply-side dynamic is a key driver of intrinsic value, provided the TVL is stable and not purely incentivized by high, temporary emissions.