Core Findings: On-Chain Protocol Valuations at Historic Lows
Grayscale Research has released a new report analyzing the revenue and valuation metrics of leading on-chain finance protocols. According to the report, among the top 15 protocols ranked by revenue, the majority now trade at single-digit price-to-sales (P/S) multiples, with some approaching 1x. Grayscale argues that current market prices fail to reflect the actual earnings power of these protocols, suggesting they are significantly undervalued.
On-chain finance protocols typically refer to decentralized finance (DeFi) applications built on blockchain networks, including decentralized exchanges, lending platforms, derivatives markets, and more. Their revenue streams come from trading fees, liquidation penalties, protocol charges, etc. During bull markets, these protocols enjoy rich valuations, but the recent market downturn has compressed multiples drastically.
CLARITY Act as a Potential Catalyst
The report specifically highlights the U.S. CLARITY Act (Crypto Legal Clarity Act), which is currently making its way through Congress. If passed, the act would provide a clearer legal framework for institutional investors entering the crypto space. Currently, institutions face significant legal uncertainty when participating in DeFi, and the CLARITY Act could reduce compliance costs and barriers, thereby attracting more traditional capital and triggering a revaluation of DeFi protocols.
Grayscale believes that if compliance hurdles are removed, the most undervalued top-tier DeFi protocols are likely to receive initial attention from institutional funds, potentially leading to a sector-wide repricing.
Conflict of Interest Disclosure: Investors Must Exercise Independent Judgment
Importantly, Grayscale explicitly discloses in the report that, as a digital asset management firm, its products may hold tokens of some of the discussed protocols. Therefore, the views expressed in the report may be influenced by its own asset management business. Grayscale reminds investors to conduct their own independent analysis and not to treat the report as investment advice.
This rare self-disclosure reflects a growing emphasis on compliance amid tighter regulatory scrutiny.