Crypto’s valuation framework may be due for an update as more networks turn protocol revenue into token buybacks and burns, a shift that Matt Hougan, Chief Investment Officer at Bitwise, argues the market has not fully priced in. In a Wednesday memo, Hougan described a growing “revenue-driven” model for crypto assets outside Bitcoin, where real usage and activity can translate into native-token value—potentially supporting much higher valuation expectations than today’s metrics imply.
Hougan went further, suggesting that if decentralized finance (DeFi) and layer-1 networks continue adopting fee-to-token mechanisms over the next 12 to 24 months, investors could begin to see token economics resemble more familiar valuation logic. The catch, he noted, is that token holders do not have the same legal rights to cash flows as traditional shareholders, and many tokenomics structures can be modified by communities.
Key takeaways
- Bitwise CIO Matt Hougan says the market is underpricing crypto assets that increasingly use protocol revenue for buybacks and burns.
- He expects more DeFi and layer-1 networks to add revenue-capture features within 12 to 24 months.
- Hyperliquid reported second-quarter revenue of $169 million and directed $141 million toward HYPE buybacks, according to the protocol.
- Uniswap’s fee “UNIfication” plan is designed to fund UNI burns through fee collection mechanisms approved for activation in late 2025.
- Aave DAO’s token repurchase program has already accumulated over 205,000 AAVE in its first 10 months, with automation plans in development.
Why protocol revenue is changing the token-value story
Hougan’s core argument is that native-token value is increasingly tied to network activity rather than being driven purely by speculation. He frames the shift as a transition toward models where fees and revenue can flow back into token supply management—either by buying tokens or removing them through burns.
For investors, the practical implication is that some assets may start to look more like income-producing businesses, at least in terms of the economic link between use and token scarcity. Hougan highlighted that this matters because traditional valuation approaches rely heavily on how cash flow is distributed to owners. Tokens, by contrast, typically do not grant a direct legal claim to revenues, and community-controlled tokenomics can evolve over time.
Still, Hougan’s memo suggests the market’s current pricing may not reflect the growing frequency with which fees are being routed back into token buy-and-burn structures.
