Why aren’t your tokens rising?

Author: Santiago R Santos, Compiler: Luffy

Right now, everyone in the crypto industry is staring at the same headlines:

• Exchange Traded Funds (ETFs) are now online

• Real businesses are integrating stablecoins

• Regulators are becoming more friendly

Aren’t these everything we have ever dreamed of?But why are prices still so low?Why did Bitcoin fluctuate back and forth during the year, giving up gains, while U.S. stocks rose 15%-20%?Why are the altcoins you are optimistic about still losing money even if “cryptocurrency is no longer a scam” becomes the mainstream consensus?

Let’s have a good chat about this issue.

Adoption rate ≠ price increase

There is a deep-rooted assumption on cryptocurrency Twitter: “Once institutions get in, regulations are clear, and JP Morgan issues tokens… we will skyrocket.”

Now, the institutions are here, we are in the headlines, but cryptocurrencies are still where they are.

There is really only one core question in the investment community: “Have these benefits been reflected in the price in advance?”

This is always the hardest thing to judge, but market behavior is sending a troubling signal: We are getting everything we want, but not driving prices up.

Could markets be inefficient?Of course it’s possible.But why?Because most areas of the cryptocurrency industry have long been seriously out of touch with reality.

A market capitalization of US$1.5 trillion…why?

Let’s zoom out and look at it.Bitcoin is in a class of its own, it is like gold, the perfect symbol of consensus.The current market value of Bitcoin is about US$1.9 trillion, while the market value of gold is about US$29 trillion. Bitcoin’s market value is less than 10% of gold.From the perspective of hedging tools and option values ​​alone, its logic is clear enough.

Ethereum, Ripple, Solana and all other cryptoassets have a combined market capitalization of around $1.5 trillion, but the narrative foundation behind them is much more tenuous.

Today, no one doubts the potential of this technology, and few think the entire industry is a scam. That phase has passed.

But potential doesn’t answer the real question: Is an industry with only about 40 million active users really worth a multi-trillion dollar valuation?

Meanwhile, OpenAI is rumored to have an IPO valuation of close to $1 trillion and has around 20 times the number of users as the entire crypto ecosystem.

Think about this contrast.Moments like this force us to confront the core question: What exactly is the best way to gain exposure to cryptocurrencies from now on?

Looking back at history: the answer is “infrastructure”.Early Ethereum, early Solana, early DeFi, these types of investments worked.

But what about now?These assets are priced as if usage and fees will increase 100-fold in the future.Perfect pricing, but no margin of safety.

The market is not stupid, just greedy

This cycle has given us all the headlines we could want…but some truths are also becoming clear:

• The market doesn’t care about your narrative, it only cares about the gap between price and fundamentals.If this gap persists for a long time, the market will eventually become disillusioned with you, especially when you start disclosing revenue numbers.

• Cryptocurrencies are no longer the hottest investment, artificial intelligence (AI) is.Money chases trends, that’s how the modern market works.Currently, AI is the absolute protagonist, but cryptocurrencies are not.

• Businesses follow business logic, not ideology.Stripe’s launch of Tempo stablecoin is a warning sign.Perhaps, enterprises will not choose to use public chain infrastructure just because they heard on Bankless that “Ethereum is the world’s supercomputer”. They will only choose the solution that is most beneficial to them.

So, just because Larry Fink discovered that “cryptocurrencies are not a scam,” will your position go up?

When assets are priced perfectly, an unintentional remark from Powell or a subtle expression from Jen-Hsun Huang may destroy the entire investment logic.

Simple calculation: Ethereum, Solana, why does revenue ≠ profit?

Let’s make a rough estimate of the situation of mainstream public chains (L1).The first is the staking income (note: this is not profit):

• Solana: About 419 million SOL are pledged, with an annualized rate of return of about 6%, and approximately 25 million SOL staking rewards are generated every year.At the current price of about $140 per coin, the reward is worth about $3.5 billion per year.

• Ethereum: Approximately 33.8 million ETH are pledged, with an annualized rate of return of approximately 4%, and approximately 1.35 million ETH staking rewards are generated annually.Based on the current price of approximately US$3,100 per coin, the reward is worth approximately US$4.2 billion per year.

Some people see the staking data and say: “Look, the pledgers can get the benefits! This is value capture!”

No, staking rewards are not value capture.They are token issuance and dilution, and they are the cost of network security, not profit.

The real economic value = the handling fee paid by the user + tip + maximum extractable value (MEV), which is the closest indicator of “profit” in the blockchain.

To put it in perspective: Ethereum generated approximately $2.7 billion in transaction fees in 2024, ranking first among all public chains.Solana has recently led the way in network revenue, bringing in hundreds of millions of dollars in revenue each quarter.

Therefore, the general situation of the current market is: Ethereum has a market value of approximately US$400 billion, and annual fee + MEV revenue is approximately US$1-2 billion.This means that based on the revenue at the peak of the cycle, its price-to-sales ratio (Note: Price-to-sales ratio PS = total market value divided by main business income. The lower the price-to-sales ratio, the greater the investment value of the company’s stock.) is as high as 200-400 times.

Solana has a market capitalization of approximately US$75-80 billion and annualized revenue of over US$1 billion.Depending on the annualized calculation method (note: don’t use peak month data to extrapolate to the entire year), its price-to-sales ratio is about 20-60 times.

These data are not precise and do not need to be precise.We’re not filing an SEC filing, we’re just trying to determine whether the valuation is reasonable.And that doesn’t even get to the real issue.

The real problem: This isn’t recurring income

These are not stable, enterprise-level revenue streams.They are highly cyclical, speculative “repeating flows”:

• Perpetual contract trading

• Memecoin Hype

• Fees incurred by forced liquidation

• MEV Peak Revenue

• Frequent entry and exit of high-risk speculative funds

In a bull market, fees and MEV will skyrocket; in a bear market, they will disappear instantly.

This is not software-as-a-service (SaaS) recurring revenue, this is Las Vegas-style casino revenue.

You wouldn’t give a Shopify-level valuation multiple to a business that only makes money every 3-4 years when the casino is full.These are different business models and should correspond to different valuation multiples.

Back to fundamentals

Under any reasonable logical framework: Ethereum, with a market capitalization of approximately US$400 billion and annual revenue (highly cyclical fees) of only US$1-2 billion, cannot be considered a value asset.

With a market-to-sales ratio of 200-400 times, coupled with slowing growth and value diversion in the Layer 2 ecosystem, Ethereum is not like the federal government in the tax system, but more like a federal government that “can only collect state-level taxes, but allows states (L2) to take most of the revenue.”

We believe that Ethereum is the “world computer”, but its cash flow performance is seriously inconsistent with its market value.Ethereum feels a lot like Cisco to me: early lead, unreasonable valuation multiples, and may never hit all-time highs again.

In comparison, Solana’s relative valuation is less outrageous, not cheap, but not crazy.With a market capitalization of $75-80 billion, it generates billions of dollars in annualized revenue at a price-to-sales ratio of about 20-40 times.It is still high and there is still a bubble, but compared to Ethereum, it is “relatively cheap”.

Let’s compare valuation multiples: Nvidia, the world’s most popular growth stock, trades at only 40-45 times earnings (Note: The P/E ratio is one of the most commonly used metrics in stock valuation and is used to measure a stock’s price relative to a company’s profitability. Its calculation formula is: P/E = Stock price / Earnings per share.) and it owns:

• real revenue

• true profit margin

• Global enterprise-level needs

• ongoing contract sales

• Huge customer base outside of crypto casinos (Fun fact: Cryptocurrency miners were the driver of Nvidia’s first real wave of growth)

Let me emphasize again: the revenue of the public chain is cyclical “casino revenue” rather than stable and predictable cash flow.

It stands to reason that the valuation multiples of these public chains should be lower than technology companies, not higher.

If the entire industry’s handling fees cannot shift from “speculative capital turnover” to “real, sustained economic value”, then the valuation of most assets will be repriced.

We’re still in the early days… but not that early

There will come a time when prices will realign with fundamentals, but that’s not yet the case.

The current status quo is:

• There are no fundamentals that support the high valuation multiples of most tokens.

• Once token issuance and airdrop arbitrage are eliminated, the value capture capabilities of many networks will cease to exist.

• Most of the “profits” are tied to speculation in casino-style products.

We have built an infrastructure that enables 24/7, low-cost, and instantaneous cross-border transfers… but we have determined that its best use is as a “slot machine.”

Greedy in the short term, lazy in the long term.To quote Netflix co-founder Mark Randolph: “Culture is not about what you say, it’s about what you do.”

Don’t talk to me about decentralization when your flagship product is “Fartcoin 10x Leveraged Perpetual Contract”.

We can do better.This is the only way we can move from being an overly financialized niche casino to a real, long-term sustainable industry.

the end of the beginning

I don’t think this is the end of cryptocurrencies, but I do believe that this is the end of the beginning.

We have invested too much money in infrastructure, with more than 100 billion US dollars sunk in public chains, cross-chain bridges, Layer 2 and various infrastructure projects, but have seriously neglected application deployment, product creation and real user acquisition.

We always brag:

• Transactions per second (TPS)

• block space

• Complex Rollup architecture

But users don’t care at all.They only care about:

• Is the cost lower?

• Is it faster?

• Is it more convenient to use?

• Can it really solve their problems?

Return to cash flow, return to unit economic benefits, return to the essence: who are the users?What problem are we solving?

Where is the real growth potential?

I have been a staunch cryptocurrency bull for over a decade and that has never changed.

I still believe:

• Stablecoins will become the default payment channel.

• Open, neutral infrastructure will support global finance behind the scenes.

• Businesses will adopt this technology because it follows economic logic, not ideology.

But I don’t think the biggest winner in the next ten years will be today’s mainstream public chains or Layer 2.

History has proven that the winners of every technology cycle appear at the user aggregation layer, not the infrastructure layer.

The Internet lowered the cost of computing and storage, but the wealth ultimately flowed to Amazon, Google, and Apple, companies that used cheap infrastructure to serve billions of users.

Cryptocurrencies will follow similar logic:

• Blockspace will become a commodity

• The marginal benefits of infrastructure upgrades will become increasingly low

• Users are always willing to pay for convenience

• User aggregators will capture most of the value

The biggest opportunity now is to integrate this technology into enterprises that already have scale.Eliminate the financial pipelines of the pre-Internet era and replace them with cryptocurrency infrastructure, if only to truly reduce costs and improve efficiency, just as the Internet has quietly upgraded all industries from retail to industry.

Businesses adopt the Internet and software because it follows economic logic.Cryptocurrencies are no exception.

We can wait another ten years for this to happen naturally.Or, let’s take action now.

Update knowledge

So where do we go from here?The technology is possible, the potential is huge, and we’re still in the early stages of real adoption.

It would be wise to re-evaluate everything:

• Evaluate network value based on real usage and fee quality, not ideology

• Not all fees are equal: distinguishing between ongoing revenue and recurring flows

• The winners of the last decade will not dominate the next decade

• Stop treating token prices as a scoreboard for technical effectiveness

We are still in such an early stage that token price is still used as a criterion for whether the technology works.But no one is going to choose AWS over Azure just because Amazon or Microsoft’s stock is up that week.

We can wait another decade for companies to proactively adopt this technology.Or, let’s start now and put real gross domestic product (GDP) on the chain.