Crypto Tokens Shift Towards Revenue-Driven Valuations

Bitwise Chief Investment Officer Matt Hougan believes that crypto tokens are entering a revenue-driven era. He argues in his memo, 'Crypto's Revenue Revolution,' that one of the major weaknesses of cryptocurrencies has been the lack of connection between successful protocols and the value captured by their tokens.

Hougan points to Hyperliquid as an example of this new trend. The decentralized exchange generated over $800 million in revenue last year and directs 99% of its fee revenue toward buying HYPE on the open market, resulting in $1.3 billion worth of HYPE being bought and burned since its launch.

Other major protocols, including Uniswap and Aave, are also adopting similar models by using revenue to buy back or burn their native tokens. This shift is not limited to decentralized finance applications, as networks such as Solana and Aptos are considering proposals to increase token burns or improve the economics flowing back to holders.

Hougan believes that investors have yet to fully price in this shift, which is one reason he thinks many crypto assets currently trade below their potential value.