The best crypto stories, often presented in numbers

Original title: "Storytime for crypto investors"

By: Byron Gilliam

Compiled by: TechFlow

"The social goal of skilled investment should be to overcome the dark forces that shroud our future time and ignorance."

——John Maynard Keynes, famous economist

Give crypto investors time to story

Although investing involves a lot of numbers, it is generally believed that investing is more like an art than a science.

"The choice of common stock is a difficult art," Benjamin Graham once warned.

Graham's lifelong student Warren Buffett further pointed out that "Investing is an art... investing cash now in the hope of getting more cash in the future."

Almost all investments boil down to predicting future cash flows.

But Peter Lynch reminds that investors who are “trained to quantify everything rigidly are at a big disadvantage.”

However, this does not mean that, as some financial nihilists claim, “valuation is just a joke (meme).

Instead, this means that applying and interpreting quantifiable valuation indicators is a creative activity in itself.

Choosing which valuation indicator is suitable for which investment is a subjective decision—and even more so in knowing how to interpret these results.

For example, low valuation does not necessarily mean that stocks are cheap, and high valuation does not necessarily mean that stocks are expensive (the situation is often the opposite).

A stock may look very cheap on some indicators, but it may seem extremely expensive on others.

There is no obvious correlation between these valuations and actual returns.

This is often frustrating—if cheap stocks don’t rise and expensive stocks don’t fall, then why bother to figure it out?

I think it's all worth looking at because that's exactly why investing is fun and engaging – if so, the fun of crypto investment has just begun.

Until recently, crypto investors have had very limited choices in terms of data, with little token price and market capitalization available.

This makes everything in the crypto world a "story" - but that's fine!

Investing is essentially the art of storytelling.

However, the best investment stories are often told in numbers, and the crypto space is gradually engaging in such conditions as more and more protocols are starting to generate revenue, and more of this revenue is allocated to token holders.

Additionally, these numbers have become easier to access thanks to the efforts of institutions like Blockworks Research. Their analysts package this data into easy-to-understand charts and reports to provide us with reference.

This helped the crypto field move to a higher level of narrative: telling stories with numbers.

Let's take a look at some of the current numbers.

Ethereum vs. Solana

Judging from crypto Twitter and podcasts, it seems that Ethereum's market sentiment has fallen to new lows, especially compared to Solana.

But if a newcomer with a traditional finance (TradFi) background looks directly at the data, he may come to completely different conclusions.

According to Blockworks Research, Solana recorded $36 million in "net income for token holders" in April, which gave the SOL token an annualized multiple of 178 times - a multiple that is higher, but may be reasonable if it is considered to be low current activity levels.

By comparison, Ethereum's net income of token holders in April was $21 million, bringing the ETH token's earnings multiple as high as 841 times.

When an investor from TradFi saw that the valuation multiple of ETH was 5 times that of SOL, he would not immediately think: "Wow, why are you so pessimistic about Ethereum?"

But they wouldn't immediately think that the market's view of Solana is five times more positive than Ethereum.

Instead, they might conclude that Solana has a lower revenue valuation, probably because it comes primarily from “low quality” memecoin trading activities; while Ethereum has a higher revenue valuation, at least in part because it includes higher quality activities, such as revenue related to real-world assets (RWAs).

Now, we have some analytical perspectives: If you think meme currency trading activity is not that low-quality, then SOL may be undervalued; and if you think real-world assets are future trends, then ETH may not be overvalued.

Of course, you can dig deeper into more information.

According to Blockworks Research, the total revenue of all Solana applications is only about 1.8 times that of Solana itself.

For a platform business, this is a very high commission rate - far higher than Apple's 30% upper limit, and the US government even believes that Apple's commission rate is already monopoly.

This may mean that Solana has too high revenue, so its token valuation multiple should be lower; or, this may indicate that Solana has a business moat, so its token valuation multiple should be higher.

In either case, this is a story worth watching.

Hyperliquid

Hyperliquid is a semi-decentralized crypto exchange with a somewhat bizarre story: The protocol generated up to $43 million in revenue in April and distributed nearly all of the revenue to token holders.

Not surprisingly, this model helped its tokens perform well lately. As Boccaccio of Blockworks Research noted in a latest report: “The aid fund uses transaction fees to repurchase tokens every 10 minutes, creating constant buying pressure.”

Once every 10 minutes!

It is difficult for us to make a clear judgment on this, because in traditional finance, no company returns 100% of its revenue to shareholders—not to mention it returns every 10 minutes.

Judging from its valuation, the crypto market seems to be a little hesitant about it.

The transaction valuation of HYPE tokens is approximately 17 times the annualized revenue (based on market capitalization), which is usually considered expensive.

But in this case, revenue and profit seem to be the same thing, so if you believe HYPE can continue to win business from centralized exchanges, such a valuation still looks quite reasonable.

Boccaccio reminds that HYPE's transaction valuation multiple is significantly higher than its decentralized peers, but these peers may not be suitable comparisons.

"Hyperliquid's L1 can significantly increase its trading volume by taking up a small part of Binance's daily trading volume... Just obtaining 10-15% of the trading volume from Binance's BTC/USDT pair can increase HyperCore's trading volume by 50%.

"So the growth multiple is reasonable," concluded Boccaccio.

Of course, the size of this multiple depends on how much trust you have in the story.

Jupiter

Jupiter is a decentralized exchange (DEX) aggregator on Solana that returns a relatively modest 50% of revenue to token holders (also achieved through repos) – but its revenue is equally considerable.

Marc Arjoon estimates that Jupiter could generate $280 million in revenue over the next 12 months, meaning that the yield of JUP tokens is about 11.5% based on market cap.

In the stock market, a 11.5% yield usually means that the business is in trouble, but it doesn’t seem to be the case here.

Jupiter is "the default router on Solana," Arjoon writes, "currently unrivaled in the aggregation space" and "is the fourth most revenue-ranked app among all encrypted dapps."

More importantly, it is operated like a real enterprise: "Jupiter's strategic action in 2024-2025 shows that it is an organization actively entering a high-speed growth phase, ambitiously positioning itself as Solana's top crypto super-app."

This doesn't sound like a company that should have a 11.5% yield.

Of course, there are still many risks, which Arjoon details in his recent report.

But he concluded that "Jupiter's current trading valuation multiple is attractive compared to his peers, indicating that it still has considerable upward potential even if the valuation multiple expansion is not considered."

He even quantified this through a segment valuation analysis, which made my traditional financial background please:

This looks like a good story.

Helium

Helium, a decentralized telecommunications service provider, has long been a hot topic in the crypto space – it was founded back in 2013.

But now, it’s not just a story, but a story with data: “Revenue measured by Data Credit Burn is accelerating, up 43% month-on-month,” Nick Carpinito of Blockworks Research wrote in a recent report.

"More importantly, Helium's revenue stream is gradually shifting from Helium Mobile to Mobile Offload, which now accounts for about three times the burn of data credit and is growing by nearly 180% month-on-month, an amazing growth rate of sales in the enterprise budget space of a DePIN (decentralized IoT) protocol."

"Mobile Offload" is the blue line in the chart above, with a quarterly growth rate of up to 180%, which is a shocking number for whoever it is.

Helium's HNT token appears to have reflected this in its valuation, with current trading prices at about 120 times the annualized sales.

But Carpinito mentioned in the 0xResearch podcast that he expects revenue to accelerate further because "AT&T allows its U.S. users to connect to the Helium network, thus driving a surge in data credit usage."

Therefore, “In the next 12 months, we will likely see an unprecedented increase in HNT prices and this rise will be more stable than previous speculative-based Helium price volatility.”

In the crypto space, it is very rare to hear someone make such price predictions based on non-speculative factors.

And refreshing.

Pendle

Finally, Pendle is a "earnings trading" protocol, and its new product "Boros" will allow users to speculate on any on-chain or off-chain earnings, starting at the funding rate.

"This implementation is similar to the classic interest rate swap market where traders can pay floating rates to get fixed rates, or pay fixed rates to get floating rates and support leveraged trading," explained Luke Leasure of Blockworks Research.

To a traditional financial person like me, this may sound complicated, but it is obviously a huge market: "The perpetual futures market settles nearly $60 trillion a year, and the open positions are hundreds of billions. Boros will enter a brand new, huge and untapped market." Leasure said he expects Boros to double Pendle's revenue.

This is rarely heard in traditional finance.

In an optimistic scenario, Leasure estimates that the "vote-escrowed" version of Pendle tokens may be traded at only 1.6 times the return:

1.6 times!

In the stock market, the valuation will only be as low as 1.6 times the return when a business is about to collapse, but obviously this is not the case with Pendle.

Still, this is not investment advice (at least not from mine), because Pendle’s story is rather complex—as most projects in the crypto space do.

But at least, these stories can be told through numbers now.