Crypto is permissionless, so anyone who has a computer or internet connection with them can use it. This makes tokens really difficult to value.
Prices of L1s (like Cardano, Ripple or Solana) are trading at ridiculous four- to five-figure ranges. These prices are far below the value-generating values for L1s as Solana (3x), Ethereum (227x) and Solana.
There are other tokens, such as OM(who? The tokens OM (who?) are the ones that have the most significant price rises, with a 47.6% increase since the last major liquidation.
There is no rational explanation. There is no rational explanation. “speculative premiums.”
Does that mean investors will stop trying to formalize the valuation of tokens? The gems are worth a great deal of money.
Investors have attempted to value the L1s in the industry’s short history using a number of tools that are now obsolete, such as the cash-flow yields and proof-of stake staking.
In the latest change in investor perception around token values, the emphasis is being placed more on fundamentals.
Maelstrom funds points to Vertex perps DEX arguing that market are “underestimating” DEX growth is a result of the DEX. “should” Trading at a valuation of 200% to 30% higher than its competitors.
The Ronin Chain thesis published by 1kxnetwork funds recently points out the deflationary burn rate of SLP as well as increasing daily active users, and revenue-producing game Pixels (up to $20.7 million by 2024).
Raydium Hyperliquid Metaplex GEODNET Jupiter and other applications are trading for a fair price. “rational” A P/S that is calculated based on a consistent cash flow with a higher growth potential.
Many of these project also participate in large token buybacks. This is often perceived to be a “fundamentals-driven” Price multiples can be used to enhance the value of a product.
Jupiter’s token-buyback program could be one of the biggest (in USD) due to its commitment of 50% in protocol fees. This would equate to about 9.4% of JUP’s circulating stock, according to this rough estimation.
The point being made “fundamentals are back” It is also a sad fact that L1/L2 prices are falling.
The legend “Layer-1 premium” It is slowly disappearing. L1s from the last cycle, like Starknet, were valued at an eye-popping $8 billion. Newer L1s are only worth less than half that amount (Berachain, Story Protocol, Celestia).
Price action in most L1/L2s has been down only over the past 12 months. This will probably cause future values to be even lower.
Dan Smith of Blockworks points out how application revenue is also starting to exceed the revenue from the L1- and L2-protocols.
All of this is based on the increasing disdain for the infrastructure overbloat in the industry. It’s no longer the age of fat protocols, but the age of fat apps.
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