Original: Inversion Founder Santiago R Santos

Translator: Azuma; Editor: Hao Fangzhou

Produced by: Odaily Planet Daily

In this cycle, those who pay attention to cryptocurrencies always see news headlines like the following:

• Certain ETF has launched;
• A well-known company is integrating stablecoins;
• Regulation is becoming more friendly;

Undoubtedly, these are all developments we once wanted to see, but why has the market dropped to this state?

Why has the U.S. stock market risen 15-20% this year, while Bitcoin has only taken a roller coaster ride of "up and down"? Why do your favorite altcoins always seem to get deeper into the hole, even though mainstream opinions no longer view the cryptocurrency industry as a scam?

Let's talk about the reasons.

Adoption ≠ Price Increase

There is a deep-rooted assumption in Crypto Twitter: "As long as institutions come in, regulations are clear, and giants are willing to issue tokens… all problems will be solved, and prices will soar."

Well, they have indeed come; you must have seen it in the news, but you also see what our current situation is…

In the investment field, there is only one truly key question — has the market already priced in the good news?

This is always the hardest thing to judge, but market behavior is telling us a hard-to-accept fact: everything we wanted has been realized, but prices haven't risen.

Is market efficiency very low? Of course! Why is that? Because the pricing of most crypto assets is severely disconnected from reality.

What Does a $1.5 Trillion Altcoin Market Cap Correspond To?

Let's zoom out a bit.

Bitcoin is a completely independent class of asset — a perfect narrative, just like gold. Bitcoin's market cap is about $1.9 trillion, while gold is about $29 trillion, with the former accounting for less than 10% of the latter's market cap, which gives it a clear logic of "hedge + option" value.

In contrast, the combined market cap of Ethereum, Ripple, Solana, and all other altcoins is about $1.5 trillion, but their narrative foundation is much weaker.

Now, not many people deny the potential of blockchain technology, and almost no one says the entire industry is a scam; that phase has indeed passed.

But "potential" does not answer the real question — can this industry, with only about 40 million active users, really be worth trillions of dollars?

Meanwhile, rumors suggest that OpenAI will IPO at a valuation of nearly $1 trillion, with a user base reportedly 20 times that of the entire cryptocurrency ecosystem. You can savor this comparison.

At such moments, we must ask ourselves a real question: what is the best way to gain exposure to cryptocurrencies from now on?

Historically, the answer has been infrastructure, such as early ETH, early SOL, or early DeFi tokens. This strategy was effective at the time.

What about today? Nowadays, the pricing of most such assets seems to assume that we have already confirmed a 100-fold increase in usage and a 100-fold increase in fee revenue. The pricing is perfect but has no margin of safety.

The Market Is Not Foolish, Just Greedy

In this cycle, the headlines we anticipated have become reality… but several facts have become clear:

• The market does not care about your story; it cares about the gap between price and fundamentals.
• If this gap persists long-term, the market will ultimately no longer give you room for trust, especially after you start to show real revenue.
• Cryptocurrencies are no longer the hottest trading objects; AI is.
• Funds will always chase momentum; that is how modern markets operate. Right now, AI is the star, and cryptocurrencies are not.
• Companies follow business logic, not ideology.
• Stripe's launch of Tempo is a wake-up call. Companies will not use public infrastructure just because they heard on Bankless that Ethereum is a world computer; they will go where their needs are best met.

So, I am not surprised at all that, despite Larry Fink (CEO of BlackRock) entering the market, the tokens you hold have not risen.

When asset pricing reaches perfection, a slight move from Powell (Chairman of the Federal Reserve) or a strange glance from Jensen Huang (CEO of NVIDIA) can destroy the entire investment thesis.

Quick Math on ETH and SOL: Why Revenue Does Not Equal Profit?

Let's do some rough calculations on mainstream Layer 1s.

First, let's look at staking — note that this is not profit:

• Solana: Staking scale of about 419 million SOL, annualized about 6%, corresponding to about 25 million SOL in staking rewards per year, estimated at $140, worth about $3.5 billion;
• Ethereum: Staking scale of about 33.8 million ETH, annualized about 4%, corresponding to about 1.35 million ETH in staking rewards per year, estimated at $3100, worth about $4.2 billion;

Some may point to staking rewards and say, "Look, stakers will receive rewards! This is value capture!"

Wrong. Staking rewards are not value capture; they are inflation, dilution, and security costs, not profit.

Real economic value comes from user-paid fees + tips + MEV, which is the part of a blockchain closest to "revenue."

In this regard, Ethereum generated about $2.7 billion in transaction fees in 2024, leading all public chains; Solana has recently been leading in network revenue, with hundreds of millions of dollars in quarterly income.

Now, let's make a rough estimate of the current situation:

• Ethereum has a market cap of about $400 billion, with annual fees + MEV generating about $1-2 billion in "revenue." This corresponds to a price-to-sales ratio (P/S) of 200-400 times based on the "casino-like revenue" during market frenzy;
• Solana, at a market cap level of about $75-80 billion, has annual revenue exceeding $1 billion. Depending on how broadly you estimate annual revenue (please do not take peak months and extrapolate for the whole year), its P/S ratio is about 20-60 times.

These are not precise, nor do they need to be. We are not submitting documents to the SEC; we just want to see if the same standards are applied when valuing such assets.

This does not even touch on the real issue. The core issue is that this revenue is not sustainable recurring income — it is not stable, enterprise-level long-term income; it comes from highly cyclical, speculative, recurring but unstable trading activities:

• Perpetual contracts;
• Meme tokens;
• Liquidations;
• MEV peaks;
• Various "on-chain casino-like" high-frequency speculation;

In a bull market, network fees and MEV revenue will surge; but in a bear market, they will disappear without a trace.

This is not SaaS's "recurring revenue"; it is more like a Las Vegas casino. You would not assign a valuation multiple similar to Shopify to a business that can only make money when the casino is packed every 3-4 years.

Different businesses should have different valuation multiples.

Returning to "Fundamentals"

In any logically coherent universe, it is hard to explain how Ethereum's market cap of over $400 billion corresponds to possibly only $1-2 billion in highly cyclical fee revenue; how can this be considered a "value" investment?

That implies a P/S ratio of 200-400 times, even as growth slows and value is continuously siphoned off by Layer 2. ETH's role resembles that of some strange federal government, receiving only "state-level tax revenue," while the states (Layer 2) keep most of the value-added income for themselves.

We have hyped ETH as the "world computer," but its cash flow situation does not match its price at all. Ethereum feels a lot like Cisco back in the day — early leadership, wrong valuation multiples, and a historical high point that may never be reached again.

In contrast, Solana seems relatively less crazy — not cheap, but not absurd either. At a market cap level of $75-80 billion, it can achieve billion-dollar annual revenue — generously calculated, with a P/S ratio of about 20-40 times. This is still high, still has a bubble, but is "relatively cheap" compared to ETH.

To properly view these valuation multiples, let's look at NVIDIA, the most popular growth stock on Earth, which has a P/E ratio of about 40-45 times (note, not P/S), and it also has:

• Real revenue;
• Real profit margins;
• Global enterprise demand;
• Sustainable, contract-backed revenue;
• And customers outside the crypto casino (notably, cryptocurrency miners were NVIDIA's first true source of high-speed growth);

Again, these blockchain revenue sources are cyclical "casino-like revenue," not stable, predictable cash flow. Strictly speaking, these blockchains should trade at a discount, not at a premium compared to tech companies.

If the entire industry's revenue cannot shift from speculative trading to real, recurring economic value, most valuations will be repriced.

We Are Still Early… But Not That Early

One day, prices will return to fundamentals, but that day is not today.

Right now, there are no fundamental reasons to pay high valuation multiples for most tokens. Many networks have no real value capture after deducting subsidies and airdrop incentives. Most "profits" are tied to speculative activities of casino-like products. We have built tracks that can transfer funds globally instantly and at low cost 24/7… yet we deem its best use case to be a slot machine.

This is short-term greed and long-term laziness.

To quote Netflix co-founder Marc Randolph: "Culture is not what you say, but what you do." When your flagship product is a 10x leveraged perpetual contract for "Fartcoin," don't preach to me about decentralization.

We can do better. This is the only way for us to upgrade from an overly financialized niche casino to a truly long-term industry.

The End of the Starting Phase

I do not think this is the end of the cryptocurrency industry, but I believe this is the end of the "starting phase."

We have over-invested in infrastructure — over a hundred billion dollars poured into blockchains, cross-chain bridges, Layer 2s, and various infrastructures — while severely under-investing in real deployment, products, and users.

We keep boasting about:

• TPS;
• Block space;
• Fancy Rollup architectures;

But users do not care about these; they care about:

• Is it cheaper?
• Is it faster?
• Is it more convenient?
• And does it really solve their problems?

It is time to return to cash flow, return to unit economics, and return to the most fundamental question — who are the users? What are we solving?

Where Is the Real Upside?

I have been bullish on cryptocurrencies for over a decade, and that has not changed.

I still believe:

• Stablecoins will become the default payment rails;
• Open and neutral infrastructure will support global finance behind the scenes;
• Companies will use this technology because it makes economic sense, not because of ideology;

But I believe the biggest winners in the next decade will not be today's Layer 1 or Layer 2.

Historically, the winners of each technology cycle emerge at the user aggregation layer, not the infrastructure layer. The internet made computing/storage cheap, and wealth flowed to Amazon, Google, and Apple — those who leveraged cheap infrastructure to serve billions of users.

• Cryptocurrencies will be similar:
• Block space is a commodity;
• The marginal utility of infrastructure upgrades is diminishing;
• Users always pay for convenience;
• Those who can aggregate users will capture most of the value;

The biggest opportunity now is to embed this technology into already scaled enterprises. Dismantling the outdated financial systems that existed before the internet era and replacing them with crypto systems, provided that these new systems can genuinely reduce costs and improve efficiency — just as the internet quietly upgraded every aspect from retail to industry due to its undeniable economic effects.

People embraced the internet and software because it made economic sense, and cryptocurrencies will be no exception.

We can wait another decade for this to happen. Or we can start taking action now.

Updating Our Understanding

So where are we now?

The technology is still viable, the potential is still enormous, and real applications are still in their early stages; now is a good time to reassess everything:

• Re-evaluate networks based on real usage and fee quality, not ideology;
• Not all revenue is the same: distinguish between truly "sustainable" revenue and "cyclical" speculative revenue;
• The winners of the last decade will not dominate the next decade;
• Stop treating token prices as a scoreboard for technology validation;

We are still too early, to the point where we still judge the effectiveness of technology based on token prices like cavemen. No one chooses AWS or Azure just because Amazon or Microsoft’s stock price went up one week.

We can wait another ten years for companies to adopt this technology, or we can start taking action now to bring real GDP on-chain.

The work is not done; we need to learn to think in reverse.

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