Crypto Valuations May Double with Revenue-Led Token Appreciation

Crypto valuations could potentially double as protocols increasingly use revenue to fund token buybacks and burns, according to Matt Hougan, Chief Investment Officer at Bitwise. Hougan pointed out that the crypto market is shifting towards a revenue-driven model where network activity directly affects native-token value.

Protocols like Hyperliquid, Uniswap, Aave, Pump.fun, and Lighter are already using fees to repurchase or remove tokens from circulation. For example, Hyperliquid generated over $800 million in revenue last year, with about 99% of it going towards buying and burning HYPE. In the second quarter, Hyperliquid reported $169 million in revenue, directing $141 million toward HYPE buybacks.

Aave's DAO has also implemented a buyback program, purchasing over 205,000 AAVE tokens during its first 10 months. The team is designing an automated, non-discretionary buyback mechanism to ensure that 100% of Aave Protocol and GHO revenue goes towards the $AAVE token.

Hougan attributes this shift to a more permissive regulatory environment in the US, allowing projects to expand without securities-law concerns. The adoption of revenue-capture mechanisms by DeFi applications and layer-1 networks is expected over the next 12 to 24 months.