Bankless's Methodology for a Successful Portfolio Rotation: From VVV to Hyperliquid, How to Find Undervalued Tokens?

Video Title: Crypto's next winners won't be blockchains

Video Author: Bankless

Compiled by: Peggy, BlockBeats

Editor's Note: Against the backdrop of a prolonged valuation contraction in the crypto market and capital flows returning, the discussion around token investing is shifting from "what is the next hot narrative" to "which projects have already formed a verifiable business model." But as revenue, buybacks, and burns gradually become the new language of valuation, a more critical question begins to emerge: can tokens be priced on cash flow like stocks, and do their holders truly own the value created by protocol growth?

In this episode of the Bankless podcast, Austin Barack, founder and managing partner of Relayer Capital, discusses projects such as Venice, Hyperliquid, Pump.fun, and ether.fi, exploring valuation methods for application tokens and the possible path for the crypto market to migrate from an infrastructure cycle to an application cycle.

In this conversation, what Austin does is not simply look for the token with the highest revenue or the largest buybacks, but rather break down token investing into a set of more fundamental structural questions: does the product have real demand, can revenue continue to grow, can business value be reliably transmitted to the token, and is the market still pricing an already-changed business using old classifications.

First, the screening logic for crypto assets is shifting from simply chasing growth to seeking the intersection of "growth and value." In the past, the industry typically manufactured growth expectations through new public chains, new protocols, and token incentives, with valuations reflecting more distant narratives. The prolonged bear market has compressed this premium, gradually creating a divergence between a small number of projects that have found product-market fit and are growing revenue rapidly, and a large number of tokens lacking real usage. This means the downturn has not only brought price discounts, but also offered investors a window to identify real businesses: projects truly worth attention need both growth speed and reasonable valuation, rather than occupying only one end of that spectrum.

Second, token value is beginning to shift from abstract "utility" to observable value return. Venice uses a portion of revenue from new subscriptions and credit purchases to burn VVV; Hyperliquid uses most of its platform revenue to buy back HYPE; Pump.fun and ether.fi have also established their own buyback mechanisms. In the past, there was often no clear link between protocol revenue and token performance, and project growth did not necessarily translate into holder returns. Now, programmatic buybacks and burns are establishing a valuation anchor for tokens akin to discounted cash flow. However, this stock-like framework still has boundaries: buyback ratios may be adjusted, and the rights relationship between equity entities and tokens has not been fully institutionalized. What investors really need to assess is not just the scale of revenue, but also the continuity and credibility of the value return mechanism.

Third, the quality of revenue matters more than revenue itself. The market has long assigned Pump.fun a lower valuation, partly because investors doubt whether Meme coin trading demand can persist and find it difficult to understand a user base different from their own profile. As platform revenue has remained resilient for more than two years, this perception is changing. Similarly, Venice's valuation depends not only on current subscription revenue, but also on whether it can expand from a multi-model gateway into an AI application platform connecting developers and ordinary users. This means valuation cannot mechanically apply buyback multiples; it also requires judging whether revenue comes from temporary incentives and hype, or from a user behavior that can recur.

Fourth, the market's old classifications of projects may become a new source of pricing bias. ether.fi was previously viewed as a liquidity restaking protocol, but now more than 60% of its business comes from Neo Bank products such as credit cards and lending, and it is further expanding into an on-chain full-service brokerage platform. If the market still prices it according to the restaking sector, it may overlook the changes that have already occurred in its revenue structure. More importantly, ether.fi can directly call on Ethereum's lending, stablecoin, and tokenized asset infrastructure to expand products with lighter organizational and capital input. This shows that the real value left by the infrastructure cycle may not continue to concentrate in the underlying protocols, but may be captured by the applications best at packaging these capabilities and directly serving users.

Fifth, application revenue can provide a valuation floor, but it cannot fully detach tokens from the crypto cycle. Projects with buyback mechanisms can rely on business growth to form a relatively independent pricing basis, but they still belong to the token asset class and are affected by market capital flows, BTC and ETH price action, and changes in on-chain activity. The difference is that when the market rises, trading-oriented applications such as Hyperliquid and Pump.fun may benefit simultaneously from capital inflows and business expansion; when the market weakens, real revenue becomes an important buffer that distinguishes them from purely narrative assets.

If this conversation is compressed into a single judgment, it is this: the core of the next crypto asset revaluation may no longer be who has a grander infrastructure narrative, but who can convert real usage into sustained revenue and reliably return part of it to the token. In this sense, this article is no longer merely discussing whether several tokens are undervalued, but whether the crypto market can evolve further from a narrative-driven financing system into an application economy based on products, cash flow, and value distribution.

The following is the original content (edited for readability):

TL;DR

· The core opportunity in the crypto market is shifting from underlying infrastructure to the application layer; in essence, revenue and users are beginning to replace the block space narrative as the new source of value.

· Whether application tokens can be revalued depends not on how much money the protocol makes, but on whether revenue can be transmitted to the token through stable, transparent buyback or burn mechanisms.

· Venice combines AI application growth with token burn logic, but the $43.9 target price relies on optimistic assumptions such as the launch of Minds and a higher burn ratio, and cannot be regarded as a certain valuation.

· Pump.fun's low valuation mainly reflects the market's skepticism about the sustainability of Meme coin revenue, but more than two years of revenue resilience shows that high-volatility speculative demand may be a long-term consumer behavior.

· Hyperliquid has stronger cyclical reflexivity than ordinary applications: returning capital may both lift HYPE's valuation and simultaneously drive up trading volume, fees, and buyback scale.

· ether.fi is still priced as a restaking protocol, but its main revenue has shifted to payments and lending; the market's old classification of the project may not have caught up with changes in its business structure.

· Buyback multiples cannot be directly equated with stock P/E ratios, because tokens usually lack clear residual income rights, and value distribution between equity and tokens remains a core risk.

· Fundamentals can reduce high-quality tokens' dependence on the broader market, but cannot eliminate the crypto cycle; truly sustainable valuation still depends on revenue quality, value return, and mechanism continuity.

Key Points

The investment approach in the crypto market has never been fixed.

Strategies that worked in 2017 may not apply in 2021; sectors that were favored in 2021 or 2024 may also lose appeal in the next cycle. In Austin Barack's view, one idea that can be reused across cycles is to seek the intersection of growth and value: the project is growing fast enough, but the valuation the market assigns has not yet fully reflected that growth.

This is not low-valuation investing in the traditional sense. Investors enter the crypto market not to find a mature company growing 10% a year with a P/E ratio of only 4x. What makes crypto assets truly attractive is that their violent capital cycles can create a combination rarely seen in traditional markets: business growth of several multiples, while valuation is suppressed by an overall market downturn.

Barack founded Relayer Capital about two and a half years ago, with a strategy covering both early-stage investment and liquid markets. In the fund's early days, the two took roughly equal effort; now about 95% of its attention has shifted to circulating tokens, focusing on two main themes: Crypto×AI and 24/7 trading and asset tokenization.

The reason is not just that the crypto market may re-enter an upward cycle. Barack believes the prolonged bear market has already helped the market complete a round of screening: after most tokens lost their narrative premium, a small number of projects that have truly found product-market fit, are growing revenue rapidly, and remain relatively reasonably valued have begun to emerge.

From Chasing Narratives to Calculating Buybacks, Tokens Begin to Have a New Valuation Language

For a long time, the valuation of crypto projects mainly relied on forward-looking assumptions such as market space, network effects, and token utility. Even if a protocol generated revenue, there was often no clear link between that revenue and the token.

Now, some applications have begun using programmatic buybacks or burns to directly convert business revenue into token buying or supply contraction. This allows investors to borrow some methods from stock valuation and approximate a token's "earnings yield" by looking at the ratio of buyback amount to token market cap.

But this method cannot be directly equated with a P/E ratio.

Stocks usually represent legal rights to a company's residual income and assets, while token holders do not necessarily have equivalent rights. Project teams can change buyback ratios and may also place new businesses under equity entities. Therefore, buyback multiples only have strong explanatory power when value return rules are relatively transparent and business revenue is sustainable.

Venice is the case Barack focuses on. It is an AI application emphasizing privacy and censorship resistance, where users can access different frontier models and open-source models on the same platform. Currently, its main revenue comes from paid subscriptions and purchases of additional compute credits.

Venice has also established two types of programmatic burn mechanisms for VVV: when users first purchase different tiers of subscriptions, the platform burns a corresponding amount of VVV; when users buy additional credits, about 5% of the purchase amount is used to burn tokens.

According to Barack's estimates, as of August 2026, Venice's annualized revenue run rate was about $107 million, corresponding to an annualized token burn of about $8.3 million. He expects revenue could rise to $336 million by 2027, with burns potentially increasing to $70 million. If a 50x buyback multiple is applied, his model implies a token valuation of about $3.5 billion; combined with the projected circulating supply at that time, the VVV target price would be about $43.9, while the price at the time of the episode was about $16.

This model contains explicitly optimistic assumptions and is not a certain forecast of future revenue.

Of the projected $70 million in burns, about $29 million comes from the not-yet-officially-launched Minds product, accounting for more than 40%. Minds is planned to allow advanced users and developers to combine different models, prompts, and tools to create structured AI applications for ordinary users, and earn revenue shares through usage, resembling an AI app store.

Barack believes Minds is not entirely a new product detached from Venice's existing business, because it still revolves around existing models, users, and use cases. But host David Hoffman pointed out that credit purchases are merely an extension of existing services, while Minds is a new business line unverified by the market, and the risks of the two cannot be equated.

Barack acknowledged this criticism and described his model as "slightly above the base case": if 0 represents extreme pessimism, 5 represents the base case, and 10 represents full optimism, he believes this forecast is roughly at 6.

The model also assumes Venice may include renewals in the burn scope in the future and raise the burn ratio on credit revenue from 5% to 10% in 2027. None of these measures have been definitively committed to, so $43.9 is better understood as a scenario valuation built on multiple business and mechanism assumptions, rather than an unconditional price target.

Venice's Real Dilemma: Why Would a Startup Burn Tokens Too Early?

The Venice case also reveals the core contradiction facing application tokens: should a fast-growing startup put cash into product expansion, or return it to token holders?

In traditional markets, companies in high-growth phases usually spend most of their funds on R&D, hiring, and customer acquisition, and rarely buy back large amounts of stock early on. Yet Venice has used part of its revenue to buy back and burn VVV since the early days of its business, to some extent sacrificing funds that could have been used for reinvestment.

Barack believes this practice is related to the dual equity-token structure of the crypto market. Tokens can help projects quickly gather attention, bootstrap a network, and design new product features, but without clear legal constraints, the market cannot naturally believe that all value created by the company will ultimately belong to the token.

Therefore, programmatic burning is not only a form of value distribution, but also a mechanism for building trust. The team needs to prove through actual actions that business growth can be transmitted to VVV, rather than remaining only in the equity entity.

Venice currently takes a gradual approach: early burns were somewhat discretionary, followed by adding first-subscription burns, and then including 5% of credit purchase revenue in burns. Barack believes this arrangement provides value return for the token while preserving most funds for growth.

Venice previously raised $65 million, which also somewhat eased the conflict between buybacks and reinvestment. Barack's understanding is that external financing provided the company with expansion capital, allowing it to use more operating cash flow for the token; the relevant investors also hold token subscription rights, which helps reduce misalignment between equity investors and token holders.

However, this balance remains fragile. If business growth slows, inference costs rise, or market competition intensifies, the company may need to retain more cash. Conversely, if the burn ratio remains too low for a long time, the token will struggle to fully share in business growth. Therefore, judging VVV's value cannot rely only on the total burn amount; investors also need to track revenue growth, gross margin, operating expenses, and whether the company continues to honor its value return commitments.

Pump.fun and Hyperliquid: Same Revenue, Why Does the Market Assign Different Multiples?

Compared with Venice, Pump.fun and Hyperliquid's revenue is more directly tied to the crypto trading cycle.

Barack said that based on market data at the time of the episode, Pump.fun was valued at about 5x buybacks, while Hyperliquid and Lighter had corresponding multiples of about 30x to 40x. In his view, this gap reflects the market's bias toward different types of revenue.

Pump.fun's core business comes from Meme coin issuance and trading. Many investors believe this activity depends on short-term speculative heat, and that revenue sustainability is inferior to perpetual contract trading platforms. Such concerns are not unfounded: the crypto industry has seen products whose revenue rose rapidly within one cycle and then fell by more than 90%.

But Barack believes Pump.fun's performance over the past two-plus years shows its revenue is more resilient than the market initially expected. The heat around a single Meme coin may fade quickly, but user demand for high-volatility, high-variance speculative products may persist over the long term.

He compares Pump.fun to casinos, lotteries, prediction markets, and ultra-short-term options. The point here is not to equate Meme coin trading exactly with those products, but to explain a demand mechanism: even if participants overall face negative expected returns, some users will continue to participate because of high volatility and small-probability high payoffs.

Based on this judgment, Barack believes Pump.fun's buyback multiple could re-rate from about 5x toward 10x. If business scale remains unchanged, multiple expansion alone could correspond to about 100% upside; if on-chain trading and Meme coin activity recover simultaneously, revenue could grow further.

However, Pump.fun's risk also comes from the relationship between equity and token. The project previously used all revenue for buybacks, then adjusted to using 50% of revenue for buybacks over the next 12 months, with the rest invested in business development. Whether this ratio continues after 12 months still needs to be decided again.

This means the authenticity of Pump.fun's revenue can be observed through on-chain data, but there is no permanent guarantee of how much revenue the token can continue to receive. When valuing PUMP, investors need to apply a discount for this institutional uncertainty, rather than directly treating all platform profits as token holder returns.

Hyperliquid, by contrast, receives a higher valuation multiple. On one hand, its crypto perpetual contract business has already generated relatively high revenue; on the other hand, the HIP-3 market is expanding trading into equities, commodities, indices, and contracts related to private companies.

Barack believes Hyperliquid demonstrates the potential of blockchain for 24/7 trading, instant settlement, and global price discovery. In the future, some not-yet-listed assets may even form price signals on-chain first, and then be used by traditional financial institutions as a reference for issuance pricing.

But this judgment still needs market validation. According to Barack, Hyperliquid's recently added real-world asset markets contributed a large amount of trading volume, but because they are still in an expansion phase, they have not yet brought revenue growth of a comparable scale. The currently more profitable business is still mainly crypto asset trading.

Therefore, Hyperliquid has stronger cyclical reflexivity than ordinary applications: when crypto capital returns, HYPE may not only benefit from a broader token valuation recovery, but platform trading volume, fees, and buyback scale may also grow simultaneously; if market activity declines, this mechanism can also run in reverse.

ether.fi Has Changed, but the Market's Classification Has Not Caught Up

ether.fi is another kind of valuation mismatch: the project's main business has changed, but the market still prices it according to an old label.

ether.fi initially entered the market with a liquidity restaking business. When the restaking narrative was hottest in 2024, its fully diluted valuation once reached about $8 billion. As market expectations for the restaking sector declined,