Key Takeaways
- • Grayscale published an earnings-based valuation framework on Oct. 21 arguing that crypto applications' fee-derived earnings, not market narratives alone, should anchor valuations, according to head of research Zach Pandl.
- • Grayscale's tokenholder yield metric adds staking rewards and buybacks, subtracts issuance, and divides by circulating market capitalization, showing how new token supply can erode holder returns.
- • Using data as of Oct. 20, HYPE led tokenholder yield at 8.0% among the top 10 protocols, while CRV ranked last at -5.5%; CAKE topped adjusted earnings yield at 14.4%.
- • Grayscale distinguishes buybacks, which reduce circulating supply, from burns, which reduce total supply, and treats bitcoin separately as digital gold.
Summary
Grayscale has published an analysis arguing that crypto applications can generate real earnings, but that growing token supplies can reduce the economic benefit reaching holders. According to the firm, the framework was outlined by Zach Pandl, head of research, in an earnings-based valuation approach published Oct. 21. Pandl wrote: "Crypto valuations don't have to rely on narratives alone."
The methodology starts with fees generated by trading, lending and other financial activities on onchain applications. Payments to liquidity providers, lenders and other suppliers are treated as costs, and the remainder is earnings that can be compared across protocols. Grayscale defines two measures: tokenholder yield, which adds staking rewards and buybacks, subtracts issuance, and divides the result by circulating market capitalization; and adjusted earnings yield, which divides total earnings by market value and subtracts circulating supply inflation.
Grayscale emphasizes that buybacks, token burns and staking distributions return value through different mechanisms, while issuance and token unlocks can offset those benefits. Hyperliquid's revenue-funded HYPE buybacks illustrate how trading activity funds repurchases, since the capacity for buybacks depends on fees collected. Grayscale describes buybacks as reducing circulating supply, whereas burns reduce total supply.
In its charts covering top-100 tokens in the FTSE Grayscale Financials Crypto Sector, excluding centralized projects, HYPE led tokenholder yield at 8.0% and CRV ranked last at -5.5% among the 10 protocols shown, with CAKE topping adjusted earnings yield at 14.4%. Data are as of Oct. 20.
Bitcoin is treated differently. Grayscale argues it should be valued as digital gold, drawing on blockchain activity and historical benchmarks in its bitcoin valuation indicators. The firm has also compared the relative market capitalizations of XRP and Zcash with bitcoin using 30-day averages within its digital currency sector.
The methodology starts with fees generated by trading, lending and other financial activities on onchain applications. Payments to liquidity providers, lenders and other suppliers are treated as costs, and the remainder is earnings that can be compared across protocols. Grayscale defines two measures: tokenholder yield, which adds staking rewards and buybacks, subtracts issuance, and divides the result by circulating market capitalization; and adjusted earnings yield, which divides total earnings by market value and subtracts circulating supply inflation.
Grayscale emphasizes that buybacks, token burns and staking distributions return value through different mechanisms, while issuance and token unlocks can offset those benefits. Hyperliquid's revenue-funded HYPE buybacks illustrate how trading activity funds repurchases, since the capacity for buybacks depends on fees collected. Grayscale describes buybacks as reducing circulating supply, whereas burns reduce total supply.
In its charts covering top-100 tokens in the FTSE Grayscale Financials Crypto Sector, excluding centralized projects, HYPE led tokenholder yield at 8.0% and CRV ranked last at -5.5% among the 10 protocols shown, with CAKE topping adjusted earnings yield at 14.4%. Data are as of Oct. 20.
Bitcoin is treated differently. Grayscale argues it should be valued as digital gold, drawing on blockchain activity and historical benchmarks in its bitcoin valuation indicators. The firm has also compared the relative market capitalizations of XRP and Zcash with bitcoin using 30-day averages within its digital currency sector.
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