A thread on how the last 180 days have affected crypto fees and revenue:
I was inspired to make this thread after looking at a chart of Compound Protocol's revenue.
Since November, the project has gone from $1m in daily revenue to less than $100k a month.
But is this unique? Do all crypto protocols depend on up-only markets to sustain rev?
Many people (including me) pointed to strong revenues and claims of product-market-fit as evidence that crypto had really reached an inflection point.
But with many crypto revenues down further than the assets themselves, it's fair to say that those revenues aren't sticky.
For reference, here's a table of some of the top protocols by revenue juxtaposed against their price action:
To be fair, most DeFi tokens have drawn by more than their fee rev, which is interesting--from a 'fundamental' perspective, stuff is trading at a discount.
I think that's the first takeaway for me, that projects with real product market fit are trading at a relative discount.
The second takeaway?
Ethereum blockspace is designed to be competitive in all parts of a market cycle.
Fees markets on Ethereum are incredibly dynamic, but a few things that stand out to me:
Blockspace is priced based on demand, so when no one wants to transact, price decreases.
In the midst of bull runs, it makes Ethereum a fee pig, generating millions every day.
But in a period of decreased demand, it makes Ethereum a lot more attractive relative to alt-L1s.
Ethereum blockspace is a premium product: something that goes after the highest-end, those customers that are most willing to pay at any price.
Just look at the BAYC land sale.
Alt-L1s do not benefit from this fee reflexivity, as their competitive advantage dies down in periods of lower activity.
This means ecosystems are much more boom/bust on Solana.
Take a look at Solana value transferred on chain:
Down 89% compared to $SOL down 84%
No knock against Solana, but on-chain activity is down about 85% from ~$60t to just $
Alt-1 activity is getting crushed, and price isn't reflecting that just yet.
Which might show an alt-L1 overvaluation, or just the fact that Alt-L1s are valued on potential, not activity.
P/S ratios.
I've definitely begun to realize that using TradFi metrics in crypto is really difficult and doesn't tell you much.
But P/S ratios still can show relative value and use for protocols.
Crazy to see the same contenders up here that were up here 180 days ago: in crypto, 'value' does not appear to predict performance.
These 'fundamental value' projects haven't weathered the downturn any better than their 'no revenue' counterparts.
If you're bored right now, go think about potential valuation models for crypto, because there are none.
As to why Spookyswap trades at a P/S of 0.7x and Stellar trades at a P/S of 97,451x?
I do not know. But if you do my DMs are open.
So where is fee revenue growing?
Optimism and Hop Protocol have had strong weeks, probably due to the Optimism airdrop.
Here's a look at the top revenue growers of the last 180 days:
No real themes here, other than a few prominent narrative rotations.
If anything tells us the state of fee revenue in crypto, it's this graph: while the top 10 biggest fee pigs managed to cross $10m in daily rev at the cycle peak, they can barely get past $1m today.
And Ethereum, as always, remains the king.
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Here's a five item checklist to help you decide which of your bags can survive a crypto winter.
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TL;DR The Survival Checklist
1. Product: Can product attract users/capital despite market conditions? 2. Runway: 3-5 years in the treasury 3. Team: Mission driven, young, and hungry 4. Network/Community: Who sticks around? 5. Tokenomics: No token or really good tokenomics
1. Product
There are two types of business models in crypto:
• ones that require token price to function
• ones that don't require token price to function
In bear markets, business models that require a strong token to perform will get absolutely rekt.