Crypto valuations could double as protocols link revenue to tokens: Bitwise CIO

Crypto valuations could at least double as protocols increasingly use revenue to fund token buybacks and burns, according to Bitwise Chief Investment Officer Matt Hougan. 

On Wednesday, Hougan said crypto outside of Bitcoin is becoming a revenue-driven market in which network activity feeds into native-token value. He said investors have not priced in that change, leaving some crypto assets undervalued.

Hougan pointed to Hyperliquid, Uniswap, Aave, Pump.fun and Lighter, protocols that use fees to repurchase or remove tokens from circulation. He said he expects decentralized finance (DeFi) applications and layer-1 networks to adopt similar revenue-capture mechanisms over the next 12 to 24 months. 

Stronger links between protocol revenue and token value could give investors conventional valuation metrics, Hougan said, adding that token holders lack shareholders’ legal claims to cash flow and that community-set tokenomics can change.

DeFi protocols turn fees into token demand

Hyperliquid, the decentralized exchange that generated over $800 million in revenue last year, uses about 99% of this to buy and burn HYPE. On Aug. 6, Hyperliquid reported $169 million in second-quarter revenue and directed $141 million toward HYPE buybacks.