After Valuation Collapse: Crypto Market Enters 'Revenue Pricing' Era
author:Joel John, Siddharth, Saurabh Deshpande
Compiled by Felix, PANews
Original title: Valuation Collapse and Revenue Fragmentation: The Real Logic of Revaluing Crypto Assets
Under the impact of AI, the crypto sector is in a period of depression. With venture capital leaving and founders considering transforming AI, is the crypto industry worth sticking to? Decentralised.co recently analyzed the protocol's revenue, starting with data. It indicated that the valuation of crypto assets is returning to rationality, while the era of high premiums for infrastructure tokens has come to an end. Founders must abandon empty narratives, establish a business model based on real income and moats, and give real rights to the token. The following are the details of the content:
The crypto market's “Fear and Greed Index” is at an all-time low. At the same time, its profitability has reached an unprecedented level. Since 2018, DeFilLama has traced that crypto-native protocols generated $74.8 billion in fees, nearly half of which ($31.4 billion) was generated during the 18-month period from January 2024 to June 2025.
After the best-performing quarters of the past eight years, why is an industry still mired in fear?
Entropy Protocol, Milkyway Protocol, Nifty Gateway, Rodeo, Forgotten Runiverse, Slingshot, Polynomial, Zerelend, Grix Finance, Parsec Finance, Angle Protocol, and Step Finance have been shut down in the past two months. These products have been in operation for many years and were created by passionate founders. Additionally, OKX, Mantra, Polygon Labs, Gemini, and Binance have all made layoffs.
Fewer and fewer people are attending industry conferences, venture capitalists are turning to AI, and developers are flocking to AI in droves. This apocalyptic pessimism is real. “If you're still in the crypto industry, switch to AI” has become a mainstream opinion.
But should you really do this?
We've been thinking about this for the past few weeks. When a new technology comes along, the market initially gives it a premium for its novelty and grand vision. In the 19th century, nearly 6% of Britain's GDP was invested in railway stocks. Cloud service provider giants will account for 2% of US GDP on capital expenditure by 2026. But when reality comes, technological trends will return to more reasonable valuations. The key is whether an industry can prove its worth after returning to rationality.
This article will analyze the historical evolution of cryptocurrency revenue, the user stickiness of the funds generated, and the nature of moats in the industry.
Research ledger
Crypto-native businesses have been generating revenue since the beginning of the crypto industry. Exchanges like Bitmex, Binance, and Coinbase are lucrative businesses. They are centralized, owned by a few people, and revenue is not disclosed. DeFi native infrastructure such as decentralized exchanges (Uniswap) and lending platforms (Aave) changed this situation, and users can check the daily earnings of the protocol.
It was expected that the token's transaction valuation would reflect the economic activity fueled by this infrastructure.
As of 2022, DEX accounted for 28.4% of revenue, with total revenue of $2.27 billion for the year. The situation is similar at the borrowing circuit, and it is highly concentrated. Aave and Compound account for 82% of all borrowing fees. Although there are leaders, people are also looking forward to agreements that are growing and trying to seize market share.
The technology itself is novel enough that it is highly valued.
The expansion of cryptocurrencies in the consumer sector followed suit. NFTs represent a promising vision: bringing cultural value to the chain. Well-known celebrities are changing their profile pictures (PFP) on X, and people think this will translate into large-scale applications. OpenSea generated $15.5 billion in revenue, accounting for 71.7% of all NFT market revenue. In hindsight, the app's $13 billion valuation didn't seem that ridiculous; they themselves could develop into a long-term monopoly.
However, fate and the market have other arrangements. By 2025, NFTs accounted for less than 1% of total revenue. We had the “Beanie Baby Moment” and didn't leave any physical souvenirs. In contrast, although DEX is growing rapidly, it is difficult for its valuation to grow. Last year, DEX generated $50.3 billion in fees, and lending platforms generated $16.5 billion in fees. Together, these two sectors account for 22.9% of total expenses, down from 33.1% in 2022.
Their economic activity's share of the larger cake has shrunk, and their valuations have declined drastically.
So, what exactly are the areas where growth has been achieved? How has the crypto-native business model changed since 2022?
The following image provides some clues.
In January 2026, stablecoin issuers Tether and Circle accounted for 34.3% of all fees. In other words, for every dollar the industry earns, $0.34 goes to these two companies. Driven by US Treasury bonds (T-bills), their revenue grew from $4.95 billion in January 2023 to $9.89 billion in 2025. For bank-scale financial products, this is entirely a start-up-level growth rate. Tether earns almost three times as much as Circle.
Their rise is due to two major factors.
The first is demand. Countries in the Global South (The Global South) have always needed tools to hedge against local inflation and enable the free flow of capital. The dollar, even the digital dollar, has filled this gap, something local currency cannot do. Capital outflows are an inevitable trend.
The second is the cost structure. Blockchain bears all the costs required to run a stablecoin business. Unlike traditional banks or fintech companies, Tether and Circle don't need to hire employees on the scale of stablecoins issued on-chain. The marginal cost of issuing the next $1 billion on-chain and transferring the next $100 billion between addresses is almost zero.
These two forces are intertwined. On the one hand, the demand side has boosted the issuance of stablecoins, and citizens vote with real money; on the other hand, the cost curve has leveled off. The two work together to make stablecoin issuance one of the most capital-efficient businesses in financial history.
The stablecoin business requires liquidity, compliance, and the Lindy effect (PANews note: For something that won't die out naturally, such as a technology or an idea, their life expectancy is proportional to how long they've been around. (That is, every time it survives for a period of time, its remaining life expectancy will increase a little more). There are only a few issuers that can stand the test of multiple cycles. Tether and Circle account for almost 99% of all stablecoin issuance revenue. Why is this happening? Both assets benefit from their first-mover advantage. The network effect of connecting multiple exchanges gives them “legitimacy,” which simply cannot be done with technology.
Tether was initially launched as a sidechain on the Omni platform. It's slow and clunky, but it can be accessed through OTC platforms and channels commonly used by exchanges. It's a distribution moat, not a technical moat. It's often difficult for the native founders of crypto to replicate this kind of moat with code alone.
Stablecoins benefit from the Lindy effect.
Soon, another cryptocurrency category will also benefit from distribution moats.
市场现在只需要一丝流动性
I have sorted out the view that “cryptocurrency is a transactional economy” in the previous two articles. One is “Capital Trends,” and the other is “Everything Is a Market,” which I wrote last year. What was not anticipated at the time was that trading products built around the Telegram trading bot and trading interface were growing so fast.
These two areas alone contributed $575 million in expenses by January 2025. It's not hard to understand given what consumers are looking for. Meme coin transactions and perpetual contracts allow users to make quick profits. In pursuit of quick returns, they are willing to pay hefty fees. The category grew from 1% to slightly more than 15% of total revenue between 2022 and 2025.
Products like TryFomo and Moonshot have generated millions of dollars in revenue by focusing on the end user. These products are not technically complicated. Instead, they have the advantage of aggregating the underlying components native to cryptography and bundling them together to create a better user experience. Thanks to the maturity of tools like Privy, developers no longer need to incentivize liquidity or worry about managing wallets.
The native features we were excited about in 2022 are now ripe. Apps like BullX and Photon are built on these features. This sector alone generated approximately $1.93 billion in transaction fees between January 2024 and February 2026.
Meme assets have a fatal flaw: they are thin in functionality and extremely cyclical. Do you feel like you've met before? This is because NFTs and Web3 games have experienced similar explosive growth and eventual collapse. This cyclicality is both a flaw and characteristic of the crypto industry. We'll explore this topic again later. But for now, let's first figure out where the revenue is going.
Perpetual contract exchanges (and later prediction markets) represent a new long-term approach. PumpFun democratizes asset issuance through meme coins, but this kind of game isn't fair.
Eventually, the market realized that Meme coins would eventually die out. Those dreams of becoming millionaires were dashed by purchasing tokens called “ShibainUYouShouldShareThisNewsletter.” People don't want to manage random token combinations; they want to take risks. Perpetual exchanges just met their needs.
You can trade Bitcoin, Solana, or Ethereum with extremely high leverage. Market makers and traders who need an alternative to centralized trading channels flock here. The core product in this category is liquidity. Hyperliquid dominates because its order book depth is comparable to that of a centralized exchange. Without this kind of parity, there's no reason for users to migrate. Over the past three years, Hyperliquid and Jupiter have accounted for most of the fees in this category.
Perpetual contract exchanges and trading platforms have completely unraveled the mystery of cryptocurrencies. They clearly show that earning a small fee from high-frequency transactions is the real way to profit. These “meme trading platforms” and perpetual contract exchanges are like packaging and selling risky dopamine-making machines.
One of these will evolve into a core financial technology that people around the world will use to trade commodities, stocks, and digital assets, even on weekends. Blockchain native apps replicate what Robinhood and Binance have long offered: venture capital channels.
The extinction of the agreement
Notice that an agreement hasn't been proposed yet? Is that the basic layer that records all internet money flows? That's because their stories are completely different (but just as important). They are the victims of the novelty premium, which is slowly fading away.
In January 2023, Optimism's PF (price-fee ratio) was 465x, Solana was 706x, and Arbitrum and BNB were approximately 206x. Today, Solana is 138x, Arbitrum is 62x, and OP is 37x. Polygon is trading at a price closer to a fintech company, 20x. Tron supports the stablecoin ecosystem, and its PF is 10.2x. Since then, Optimism, Solana, Arbitrum, and Polygon have each implemented more complex products. They each have more users, better liquidity, and a more complex suite of financial applications built on them.
Their PF discount reflects the market's perception of them.
Historically, L1 and L2 have been traded at a very high premium compared to standalone underlying facilities or projects. If this premium had been well invested, a new economic system could have been created. It could have funded developers to build apps that really make sense for ordinary people outside of the industry. However, the open source nature of the product and the ease of tokenization caused us to have 50 copies of the same product on 30 networks, and compositional properties were disrupted.
That's fine, because we have cross-chain bridges, cross-chain messaging, and countless other mechanisms for transferring funds. And all of these mechanisms are declining in value today.
Take the fate of DeFi infrastructure projects, for example. Too many choices and lack of innovation from investors caused valuations to plummet, even though these basic projects did drive more economic activity. These markets are highly fragmented, and investors have plenty of options to bet on. The freshness of being “decentralized” or “blockchain-based” has long since subsided. Projects such as Kamino, Euler, Fluid, Meteora, and PumpSwap have sprung up one after another, but their price-cost ratio is below the level of the 2022 agreement. As shown in the TokenTerminal chart below, DEX's price multiples dropped drastically between 2023 and 2025. Some exchanges now have price-fee multiples as low as 1.
In other words, the market values them less than what they will incur in the year ahead. A strange paradox has emerged: while the valuations of the underlying protocols (whether DeFi or L1 itself) are trending downward, apps built on these protocols are generating higher revenue in a shorter period of time.
Since the beginning of 2020, the number of teams with quarterly revenue exceeding one million dollars has grown steadily, and now there are over 100. In 2020, those agreements that took 24 months to reach $10 million in annual revenue were considered to be growing rapidly. By 2024, the time it took for the agreement to reach this milestone was reduced to about six months. Launched in early 2024, Pump.Fun reached $10 million in revenue in just about two months, setting a record for the fastest growth rate.
This accelerated growth reflects both the maturity of the underlying infrastructure (faster chains, lower transaction costs) and the growing pool of funds on the chain (seeking revenue and entertainment). If you're a developer or founder, consider these facts:
Today's crypto market has nearly 900 revenue-generating protocols.
Each agreement is vying for a shrinking share of median revenue, but looking at the broader trend, more and more teams are generating revenue. For reference, the number of agreements generating revenue has increased nearly 8-fold, from 116 to 889.
The median monthly income has dropped to $1.3 million.
Blockchain native enterprises have three forms of moats. Each one is obvious when studying its revenue model.
First-mover advantage: The network effect Tether and Circle gained from their early advantage is difficult to replicate. Despite the constant emergence of new players, they have gone through multiple cycles and established a duopoly position. At present, these companies have not been tokenized and are highly financialized. Tether is a centralized entity whose revenue comes mainly from US Treasury bonds.
Liquidity moat: In an industry where capital has historically been utilitarian, Aave is able to maintain a depth of liquidity across cycles. Hyperliquid seems to have done this too, but it's still too early to draw conclusions. These agreements have incentives to return funds to liquidity providers and reorient tokens to governance functions.
Distribution moats: Cyclical apps, such as meme coin trading platforms, depend on the speed of capital flows and consumer demand. Web3 games and NFTs are great examples. AI-enabled productivity will mean that small, lean teams can now launch consumer-facing products faster. Where do the advantages come from? At the end of the day, it's about guiding and retaining the most users when the market is hot.
Products built on distribution moats can be extremely valuable, but they are the exception rather than the norm. Traditionally, a startup is valuable because its experience can be replicated. Y Combinator's success is due in part to the “Lindy effect” of past successful ideas. Cryptocurrency is growing too fast to replicate this experience based on the Lindy effect, which partly explains why it's rare to see founders replicate their successful experiences in the consumer goods sector to other fields. The cyclical factors that initially helped businesses scale may not be replicated.
That doesn't mean the founders shouldn't seize these opportunities. Segments such as forecasting markets or data providers representing economic products may generate significant cash flows in the short term. But it's important to understand that these are all highly volatile, short-term games that may not last. The pitfalls of such products are blindly raising venture capital, or being trapped by a token that was issued long after the “Meta (core narrative)” that gave life to the product died out.
So, what exactly makes tokenized businesses valuable? Are their valuations reasonable?
The data may provide some clues.
Questioning governance
In 1999, many technology companies had a market sales ratio (P/S) of 10 to 20 times. Content delivery network company Akamai's market-sales ratio was as high as 7434 times. By 2004, Akamai's market-sales ratio had dropped eight times. Many companies' market-sales ratios plummeted from 30x to 50x to less than 10x. The bursting of the internet bubble evaporated trillions of dollars in speculative value. However, many companies eventually survived because their underlying business was real. Amazon's stock price fell 94% from the peak of the internet bubble, but it eventually became one of the most valuable companies in history.
The crypto industry is experiencing the same contraction in market capitalization, and at a faster rate. In 2020, when DeFi was still experimental, the total annual revenue generated by the crypto industry was only around $21 million. At the time, the average market-sales ratio of all tracked agreements was 40,400 times higher. The market hype at the time was all about the future: “What might cryptocurrencies look like?” By 2021, with the arrival of the “summer of DeFi,” protocol revenue was converted into actual earnings, and the market sales rate plummeted to 338 times. Today, the annualized revenue is $18 billion, and the market sales ratio is about 170 times. The market sales ratio was reduced from 40,400 times to 170 times, and it only took five years.
There is, however, a problem here. Shareholders can receive dividends and buybacks when Visa's market-sales ratio is 18x. They have legal ownership of the company's proceeds and a corporate governance seat under securities laws. And when Aave's market-sales ratio was 4x, token holders had governance rights, but until recently, they had no direct right to financial gain. Hyperliquid uses its bailout fund for buybacks, making HYPE holders the closest thing to equity holders in the DeFi sector. Aave approved a $50 million annual buyback plan in 2025.
你觉得我能把这些糟糕的图表当作艺术品吗？
These initiatives are significant, but they are just exceptions. In the broader market, most agreements lack mechanisms to return value to token holders. These market-sales ratio multiples appear to be very low, and holders' equity is weaker than in traditional markets. These multiples are possible because the crypto industry generates revenue at a scale and efficiency unmatched by traditional commerce.
The agreements that lower the market sales rate of cryptocurrencies are not large organizations with thousands of employees. They are small teams running global financial infrastructure, with marginal costs close to zero and no physical office space. How thin can these costs be? How much trust can holders have in these teams' proper use of the agreement's revenue?
By segmenting the market by track, you can understand the market situation more clearly. Aave, the largest lending protocol in the DeFi sector, has a market-sales ratio of about 4 times. Hyperliquid controls about 80% of the decentralized perpetual futures market, and its market-sales ratio is about 7 times. These aren't bubble multiples. Arguably, they are even lower than the closest traditional financial counterpart companies. Coinbase, the only major publicly listed crypto exchange, has a market-sales ratio of around 9 times. The Chicago Mercantile Exchange Group (CME Group) is the world's largest derivatives exchange, with a market-sales ratio of about 16 times. Visa, the payment infrastructure, has a market-sales ratio of about 15 times.
Crypto analyst Will Clemente mentioned in the podcast that cryptocurrencies are capitalism in its purest form. No successful company in any industry can reach Tether's estimated profit of as much as $100 million per capita. To make it easier to understand, Nvidia's per capita income is $5.2 million, Apple's $2.4 million, and Google's $2 million. Tether has 125 employees and annual revenue of about $12.5 billion. Its size indicates that the company has the highest profit per employee in the history of the company.
Although the overall price-to-sales ratio figure of 170 times seems crazy, the market is not irrational about agreements that actually generate revenue. It is priced at or below traditional financial infrastructure.
This leads to the next question: What exactly are tokens for? In many areas, tokens are a powerful tool for pooling capital and working towards a shared vision. Cryptocurrency is at a stage where entrenched oligopolies have become the norm. Traditionally, founders must borrow (using equity as collateral) or raise capital to inject capital into financial products. Hyperliquid, Uniswap, Jupiter, and Blur all prove that with token incentives, people will invest capital into new products. If the token comes with governance rights, these people can contribute more. In this regard, the token is likely to evolve two functions:
Coordinate capital and resources from the right people;
Empower them to govern agreements.
The token itself is no longer valuable; even the stock is now tokenized. These instruments must have the right to claim economic activity and the ability to guide governance. Many Layer 1 and Layer 2 tokens are difficult to achieve both. Teams and VCs usually hold most of the tokens, leaving retail holders in chaos. This leaves the average investor with no reason to pay attention to newly listed digital assets.
Today, these attempts are showing a trend of fragmentation. MetaDAO allows holders to get a full refund if the team makes a false statement. There are currently no major agreements using this model. The core problem with cryptocurrencies is that traditional tokens give very few rights to their holders. Today, various agreements are trying to answer an age-old question: Why should people hold these assets? Future articles will explore the link between holders' rights and valuation.
fork in the road
Over the past two decades, capital markets have become increasingly intertwined. This is due in large part to advances in technology. We can trade commodities, overseas indices, digital assets, and even compute resources (GPUs) in the near future. Blockchain makes it possible to trade in these markets on a global scale, anytime, anywhere. The NASDAQ and NYSE are now moving towards an all-weather trading model, which is an example of an era of technological change.
We live in a highly financialized world, and ironically, news of war made us scramble to find the best prediction markets to bet on.
For founders, this meant rethinking the products they built and how they built them. If the data in this article explains anything, it's that all blockchain products will ultimately be profitable through two core principles.
by extracting a small commission from high-frequency transactions, or
Extract large commissions on transactions that focus on verifiability and trust assumptions.
The advantage lies either in the speed of transactions or in verifiable transparency.
The profit motive is the purest driving force for capital market participants. It is widely believed that the market will eventually become extremely efficient. We've seen this trend reflected in industry leaders. For example, we saw a chart showing that 70% of multiple market segments are in the hands of two key companies. This is a harsh reality we all have to face, and it's also a harsh aspect of how the market works. For the founders, this meant that money that once went to their tokens is now being reallocated to assets with higher volatility or higher return on capital.
Long-term capital does exist and may even pay a premium, but only if it recognizes the value of the underlying business. Investors in Google and Amazon don't need to fight back out because their underlying business itself is valuable.
In an age where even the value of software itself is being questioned, blockchain native applications will have to find new ways to reflect value. We can restructure the tokens. Perhaps, it is even possible to let the shares of startups be traded on the chain. But it's not just a question of the token; it's also a matter of the business model. The vast majority of long-tail blockchain applications, such as Web3 social, identity, and gaming products, are difficult to scale and meaningfully differentiate from traditional competitors. These experiments aren't worthless, and it's difficult for us to effectively monetize them.
The era of building cryptocurrency infrastructure is over. In the future, it will be integrated with the internet. Back then, people stopped talking about “online” businesses; you existed on the internet yourself. No one calls themselves a “mobile app developer” anymore; you're a developer yourself.
Long live the age of blockchain enthusiasts! We're just advocates of maximizing ledgers, thinking about how to make the best use of these ledgers.
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