Bitwise CIO suggests crypto valuations could rise via protocol revenue

Bitwise Chief Investment Officer Matt Hougan suggests that cryptocurrency valuations could potentially double as protocols increasingly adopt revenue-driven models. Hougan argues that many investors have not yet priced in the shift toward crypto assets that use network activity and fees to fund token buybacks and burns, potentially providing conventional valuation metrics for decentralized finance (DeFi) and layer-1 networks.

Hougan cites several protocols as evidence of this trend. Hyperliquid, a decentralized exchange, reportedly used approximately 99% of its $800 million in revenue from last year to buy and burn its HYPE token. Uniswap has also linked its revenue to token value through its ‘UNIfication’ overhaul, which allows collected fees to fund UNI burns. Additionally, Aave DAO has implemented buyback programs, with founder Stani Kulechov noting that 100% of Aave Protocol and GHO revenue is directed toward the AAVE token.

The shift toward revenue-capturing mechanisms is attributed to a more permissive regulatory environment following legal precedents and changes in leadership at the Securities and Exchange Commission (SEC).