Crypto Market Ignores Revenue, Igniting Debate Over Token Value

Crypto market values are largely ignoring revenue, according to a recent analysis by Milk Road. Ethereum, for example, has a market value of around $326 billion, but its revenue over the past 12 months was only around $64 million, according to DefiLlama. This means that Ethereum's revenue is only about 0.02% of its market value.

The same trend is seen in other major chains, with most of them having revenue that is a tiny fraction of their market value. This has led to a question: what exactly are investors paying for when they buy into these tokens?

There are two main camps on this issue. The first camp, led by Fundstrat's Tom Lee, sees Ethereum as a 'money' asset, similar to scarce land under a growing city. According to this view, the value of Ethereum will continue to rise as more activity is built on top of it.

The second camp, on the other hand, sees Ethereum as a revenue asset, and argues that its value will be determined by its ability to generate revenue. According to this view, the fact that Ethereum's revenue is so low compared to its market value is a major red flag.

Greg Viverito, a general partner at TAG Capital, made this point on The Milk Road Show last week. He noted that protocols that do generate revenue, such as Hyperliquid, are able to attract more investors and grow in value.