Author: Santiago R Santos, Founder of Inversion
Translated by: Yangz, Techub News
Everyone in the crypto space is focused on the same headlines:
ETFs have been approved for launch
Traditional companies are increasingly adopting stablecoins
Regulation is becoming more friendly
This is exactly the situation we once hoped for, but why are prices still falling?
Why did Bitcoin rise and then fall back, while U.S. stocks have increased by 15-20% this year? Why are your favorite altcoins still trapped in "prison," even though "cryptocurrency is no longer a scam" has become mainstream consensus?
Today, let's talk about this.
Adoption ≠ Price Increase
There is a deep-seated assumption in Crypto Twitter: "Once institutions enter, once regulation is clear, once JPMorgan issues a coin… it will go straight to the moon." Now, institutions have really come, the headlines are everywhere, yet we are still stuck in place.
Investment ultimately boils down to one question: Is the market already priced in? This is always the hardest to judge. But market performance is revealing an awkward truth: we have gotten everything we asked for, yet we have not been able to shake the prices.
Will the market fail? Of course. Why? Because most cryptocurrencies are severely disconnected from reality.
What exactly did $1.5 trillion buy?
Let's take a broader perspective.
Bitcoin stands alone. It is a perfect cultural meme, much like gold. Bitcoin's market cap is about $1.9 trillion, while gold is around $29 trillion, making up less than 10%, but its hedging properties and options value logic hold.
Other projects like Ethereum, Ripple, and Solana have piled up about $1.5 trillion in market cap, but the stories supporting them are far weaker.
No serious person would question the technical potential of these projects anymore, and few would insist that it’s all a scam. That phase is over. But potential does not answer the core question: Is the entire industry really worth trillions of dollars with only about 40 million active users? Meanwhile, rumors suggest OpenAI will IPO at a valuation close to a trillion, with a user base 20 times that of the entire crypto ecosystem. Please ponder this data comparison carefully.
Such moments force people to confront the key question: What is the best way to gain exposure to the crypto market from now on?
Historically, it has been infrastructure, early ETH, early SOL, early DeFi. This strategy has worked time and again. But what about now? The pricing of these assets seems to guarantee a hundredfold usage and a hundredfold transaction fees. Valuations are nearly perfect, yet there is no margin of safety.
The market is not stupid, it is just greedy
This cycle has given us all the headlines… but several facts have gradually become clear:
The market does not care about your story, only the gap between price and fundamentals: When this gap persists for too long, the market will eventually retract its trust premium. Especially when you start generating revenue.
Crypto assets are no longer the hottest trading targets; AI is: Money always chases momentum. This is the operating principle of modern markets. Right now, AI is the star, not crypto assets.
Businesses follow commercial logic, not ideology: The launch of Tempo by Stripe is a warning. Perhaps, I say perhaps, businesses will not use this public chain just because they heard "Ethereum is the world computer" on Bankless; they will only choose the path that best serves their interests.
So even if BlackRock CEO Larry Fink publicly admits that cryptocurrency is not a scam, it is not surprising that the coins you hold have not risen. When asset valuations reach perfection, a slight signal from Powell or a subtle expression from Jensen Huang can destroy the entire investment logic.
Calculating ETH and SOL staking rewards, why "revenue" ≠ "profit"
Let’s do a rough calculation of the mainstream layer one networks.
First, look at staking (not yield):
Solana: About 419 million SOL staked × annualized 6% ≈ 25 million SOL/year; at a price of $140, this amounts to about $3.5 billion/year in "rewards"
Ethereum: About 33.8 million ETH staked × annualized 4% ≈ 1.35 million ETH/year; at a price of $3100, this amounts to about $4.2 billion/year in "rewards"
Some may point to the staking data and claim: "Look, stakers are earning! This is value capture!"
Wrong. Staking rewards are not value capture. They are inflation, dilution, and security costs, not revenue.
True economic value = transaction fees paid by users + tips + MEV. This is the concept closest to "revenue" in blockchain.
In this regard: Ethereum is projected to generate about 2.7 billion dollars in transaction fees in 2024, leading all public chains; while Solana has recently shown outstanding network revenue performance, generating hundreds of millions of dollars each quarter.
So, with a rough estimate based on current conditions:
Ethereum annualized fees + MEV "revenue" is about $1-2 billion, corresponding to a market cap of about $400 billion. Based on the peak casino revenue of this cycle, the price-to-sales ratio reaches 200-400 times.
Solana annualized revenue exceeds $1 billion, corresponding to a market cap of about $75-80 billion. The price-to-sales ratio is about 20-60 times—depending on how optimistic your annualized calculations are (please do not simply extrapolate from a single month’s peak).
These calculations are not precise, nor do they need to be. We are not submitting a report to the SEC; we just want to confirm whether valuations and fundamentals are on the same scale. And the real core issue has yet to be discussed.
The real issue is: This is not sustainable revenue
The following are not stable enterprise-level revenue sources, but highly cyclical, speculative pulses of capital flow:
Perpetual contracts
Meme coins
Liquidation waves
MEV peaks
Gambler-style trading
In a bull market, these fees and MEV will surge, but in a bear market, they will vanish without a trace. This is not SaaS-style recurring revenue; it is a Las Vegas casino.
You would not assign a valuation multiple like Shopify to a business that can only profit when the casino is packed every three to four years. Different business models naturally lead to different valuation logics.
Returning to "fundamentals"
In any logically coherent system, supporting a market cap of over $400 billion with about $1-2 billion in highly cyclical fee revenue cannot be considered a "value" investment.
Because this implies a price-to-sales ratio of 200-400 times, with slowing growth and facing L2 value loss. Ethereum is not like the federal government in a tax system; it resembles a federal government that can only collect state-level taxes while allowing states (L2) to retain most of the revenue.
We have hyped Ethereum as the "world computer," but cash flow simply cannot support the valuation. Ethereum reminds me of Cisco: early leadership, valuation mismatch, and perhaps historical peaks may never be seen again.
In contrast, Solana's valuation is relatively rational. Although the coin price is also not cheap, it is at least not as absurd.
Its annualized revenue is in the billions of dollars, corresponding to a market cap of $75-80 billion, generously estimating a price-to-sales ratio of about 20-40 times. This data is still high, with some bubble, but it appears "cheap" relative to Ethereum.
"Dear liquidity providers: We outperformed Ethereum, but the fund is still down 80%." It turns out we have been pricing casino flows using a software subscription revenue model.
To make these multiples more tangible, take Nvidia as an example, the most sought-after growth stock globally, with a price-to-earnings ratio of 40-45 times (not price-to-sales!), and it has: real revenue, real profit margins, global enterprise demand, recurring contract sales, and customers outside the crypto casino (interestingly, crypto miners were a major force behind Nvidia's initial explosive growth).
Again, this is based on cyclical casino revenue, not stable, predictable cash flow.
Logically, these public chains should trade at a discount relative to tech stocks, not a premium. If the entire industry's fees cannot shift from speculative trading to real sustainable economic value, then most valuations will face reconstruction.
We arrived early… but not that early
One day, prices will return to fundamentals. But it is still too early. The reality now is that the vast majority of tokens are simply not worth paying a high valuation premium. Once inflation incentives and mining airdrops are removed, the value capture ability of most public chains disappears.
We have built a track that allows for instant, low-cost global fund transfers anytime and anywhere, yet we have determined that its best application scenario is a slot machine. This is short-term greed and long-term complacency.
To quote Netflix co-founder Marc Randolph, "Culture is not a slogan; practice is the truth." When your flagship product is a Fartcoin ten times leveraged perpetual contract, please do not preach decentralization to me.
We should have done better.
Only in this way can we transform from "over-financialized niche casinos" into a truly long-term industry.
The End of the Beginning
I do not believe this is the end of the crypto era. But I am certain this is the end of the enlightenment era.
We have over-invested in infrastructure—over $100 billion poured into public chains, cross-chain bridges, layer two networks, and infrastructure—yet we have severely under-invested in application landing, product development, and real user acquisition.
We are still bragging about: transaction volume per second, block space, and fancy Rollup architectures. But users do not care at all. What they care about is: Is it cheaper? Is it faster? Is it more convenient? And does it truly solve their problems?
Let us return to cash flow, return to unit economics, return to essence, and ask, "Who are the users? What pain points have we solved?"
Where is the real value gap?
I have been bullish on the crypto space for over a decade, and this position has never changed.
I still firmly believe:
Stablecoins will become the default payment channel
Open and neutral infrastructure will support global finance behind the scenes
Enterprises will adopt this technology for economic rationality rather than ideology
But I do not believe that the biggest winners of the next decade will be today’s layer one and layer two networks. The winners of past technology cycles have emerged at the user aggregation layer, not the infrastructure layer. The internet drastically reduced the cost of computing and storage, ultimately directing wealth to Amazon, Google, and Apple—those companies that leveraged cheap infrastructure to serve billions of users.
The crypto space will repeat this logic:
Block space will eventually be commoditized
The benefits of infrastructure upgrades will become increasingly marginal
Users will always be willing to pay for convenience
User aggregators will capture the most value
The biggest opportunity right now lies in embedding technology into established enterprises. Eliminating the financial pipelines of the pre-internet era and replacing them with truly cost-effective and efficient crypto infrastructure—just as the internet quietly transformed various sectors from retail to industrial due to its irresistible economic effects.
People accepted the internet and software for economic rationality back then, and crypto technology will follow suit. We can wait another decade for the transformation to happen. Or we can start taking action right now.
Updating Our Understanding
Where does this reflection lead us?
The technology is indeed feasible
The potential remains enormous
Real applications are still in their early stages
We need to reassess everything:
Evaluate network value based on actual usage and cost quality (rather than ideology)
Not all costs are created equal: there is a fundamental difference between recurring revenue and cyclical revenue
The winners of the last decade may not dominate the next decade
Stop treating token prices as a scoreboard for technology validation
We are still in the early stages, to the extent that we are still using token prices to judge whether technology is effective. However, no one would choose AWS over Azure just because Amazon or Microsoft’s stock price rose one week.
We can wait another decade hoping for enterprise adoption, or we can take immediate action to bring real GDP on-chain.
The mission is not yet complete; think in reverse and engage actively.
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