Bankless's Winning Rebalancing Method: 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 prolonged valuation contraction and capital reallocation in the crypto market, the discussion around token investment is shifting from "what's the next hot narrative" to "which projects have already established verifiable business models." But as revenue, buybacks, and burns gradually become the new valuation language, a more critical question emerges: Can tokens be priced like stocks based on cash flow, and do their holders truly own the value created by protocol growth?

In this episode of the Bankless podcast, Relayer Capital founder and managing partner Austin Barack joins to discuss valuation methods for application tokens, using projects like Venice, Hyperliquid, Pump.fun, and ether.fi as examples, and explores the potential path of the crypto market's migration from an infrastructure cycle to an application cycle.

In this conversation, Austin does not simply seek out tokens with the highest revenue or the most aggressive buybacks. Instead, he breaks token investing down 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 And is the market still pricing a changed business using outdated categories?

First, the screening logic for crypto assets is shifting from purely chasing growth to seeking the intersection of "growth and value." In the past, the industry typically relied on new public chains, new protocols, and token incentives to manufacture growth expectations, with valuations reflecting more distant narratives. The prolonged bear market has compressed this premium, gradually separating the few projects that have found product-market fit and rapid revenue growth from the many tokens lacking real usage. This means that downturns don't just offer price discounts; they also provide investors with a window to identify real businesses: projects truly worth watching need to possess both growth speed and reasonable valuation, rather than occupying only one end of the spectrum.

Second, token value is beginning to shift from abstract "utility" to observable value return. Venice burns VVV with a portion of revenue from new subscriptions and credit purchases; 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 returns for token holders. Now, programmatic buybacks and burns are creating a valuation anchor for tokens similar 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 is not yet fully institutionalized. What investors really need to assess is not just the scale of revenue, but the sustainability and credibility of the value-return mechanism.

Third, revenue quality matters more than revenue itself. The market has long assigned Pump.fun a relatively low valuation, partly because investors doubt whether demand for meme coin trading can persist and struggle to understand a user base different from their own profile. As the platform's revenue has remained resilient for more than two consecutive 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 entry point 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 repeatable user behavior.

Fourth, the market's outdated categorization of projects may become a new pricing bias. ether.fi was previously viewed as a liquid restaking protocol, but more than 60% of its business now comes from Neo Bank products such as credit cards and lending, and it is further expanding into an on-chain integrated 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 leverage lending, stablecoin, and tokenized asset infrastructure on Ethereum to expand its products with relatively light organizational and capital investment. This shows that the true value left by the infrastructure cycle may not continue to concentrate in underlying protocols, but may be captured by applications that are best at packaging these capabilities and directly serving users.

Fifth, application revenue can provide a valuation floor, but it cannot completely decouple 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 trends, and changes in on-chain activity. The difference is that when the market rises, trading-oriented applications like Hyperliquid and Pump.fun may simultaneously benefit from capital inflows and business expansion; when the market weakens, real revenue becomes an important buffer distinguishing them from purely narrative assets.

If this conversation is compressed into a single judgment, it is this: the core of the next round of crypto asset revaluation may no longer be about who has a grander infrastructure narrative, but about who can convert real usage into sustained revenue and credibly return a portion of it to tokens. In this sense, what is discussed here is not just whether a few tokens are undervalued, but whether the crypto market can evolve 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, with revenue and users replacing 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 tokens 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 an increased burn ratio, and cannot be considered a definitive valuation.

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

· Hyperliquid has stronger cyclical reflexivity than typical applications: capital inflows can both lift HYPE's valuation and simultaneously boost 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, and the market's old categorization may not have caught up with changes in its business structure.

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

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

Key Points

Investment methods in the crypto market are never fixed.

Strategies that worked in 2017 may not apply in 2021; sectors that were popular in 2021 or 2024 may lose appeal in the next cycle. In Austin Barack's view, one approach that can be reused across cycles is to seek the intersection of growth and value: projects growing fast enough, but whose valuations have not yet fully reflected that growth.

This is not traditional value investing. Investors do not enter the crypto market to find a mature company growing 10% annually with a P/E 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 growing several-fold while valuations are suppressed by an overall market downturn.

Barack founded Relayer Capital about two and a half years ago, with a strategy covering both early-stage investments and the secondary market. In the fund's early days, the two occupied roughly equal attention; now about 95% of its focus has shifted to liquid tokens, concentrating 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 that the prolonged bear market has helped the market complete a round of screening: after most tokens lost their narrative premium, a few projects that have truly found product-market fit, are growing revenue rapidly, and still have relatively reasonable valuations have begun to stand out.

From Chasing Narratives to Calculating Buybacks: Tokens Gain a New Valuation Language

For a long time, crypto project valuations relied mainly on forward-looking assumptions such as market size, network effects, and token utility. Even when protocols generated revenue, there was often no clear link between that revenue and the token.

Now, some applications are beginning to use programmatic buybacks or burns to directly convert business revenue into token buying pressure or supply contraction. This allows investors to borrow some methods from stock valuation, using the ratio of buyback amount to token market cap to approximate the token's "earnings yield."

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

Stocks typically represent legal rights to a company's residual earnings and assets, while token holders do not necessarily have equivalent rights. Project teams can change buyback ratios and may 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 a key case discussed by Barack. It is an AI application emphasizing privacy and censorship resistance, allowing users to access different frontier and open-source models on the same platform. Its main revenue currently 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 subscriptions at different tiers, the platform burns a corresponding amount of VVV; when users purchase 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 is about $107 million, corresponding to an annualized token burn of about $8.3 million. He expects that by 2027, revenue could grow to $336 million, and burns could rise to $70 million. Applying a 50x buyback multiple, his model implies a token valuation of about $3.5 billion; combined with the projected circulating supply at that time, the VVV target price is about $43.9, compared to about $16 at the time of the show.

This model carries clear optimistic assumptions and is not a definitive forecast of future revenue.

Of the projected $70 million in burns, about $29 million comes from the Minds product, which has not yet officially launched, accounting for more than 40%. Minds plans to allow advanced users and developers to combine different models, prompts, and tools to create structured AI applications for ordinary users, earning revenue shares based on usage—similar in form to an AI app store.

Barack believes that Minds is not a completely new product detached from Venice's existing business, as it still revolves around existing models, users, and use cases. However, host David Hoffman points out that credit purchases are merely an extension of existing services, while Minds is an unproven new business line, and the risks of the two cannot be equated.

Barack acknowledges this concern and describes his model as "slightly above the base case": if 0 represents extreme pessimism, 5 represents the base case, and 10 represents full optimism, he places this forecast at around 6.

The model also assumes that Venice may include renewals in the burn scope in the future and increase the burn ratio on credit revenue from 5% to 10% in 2027. None of these measures are currently guaranteed, 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 Buy Back Tokens Prematurely?

The Venice case also reveals the core contradiction facing application tokens: should a high-growth startup invest cash in product expansion or return it to token holders?

In traditional markets, companies in high-growth phases typically allocate most of their funds to R&D, hiring, and customer acquisition, rarely conducting large-scale stock buybacks early on. Venice, however, has been using a portion of its revenue to buy back and burn VVV from the early stages of its business, which to some extent sacrifices funds available for reinvestment.

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

Therefore, programmatic burns are not just a value distribution method but also a trust-building mechanism. The team needs to demonstrate through concrete actions that business growth can be transmitted to VVV, rather than remaining only within the equity entity.

Venice is currently taking a gradual approach: early burns have some discretion, followed by the addition of first-subscription burns, and then including 5% of credit purchase revenue in burns. Barack believes this arrangement provides value return to the token while retaining most funds for growth.

Venice previously raised $65 million, which has somewhat alleviated the conflict between buybacks and reinvestment. Barack's understanding is that external financing provides the company with expansion capital, allowing it to use more operating cash flow for the token; the relevant investors also hold token warrants, which helps reduce the misalignment of interests 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 over the long term, the token may struggle to fully share in business growth. Therefore, judging VVV's value requires not only observing the total burn amount but also tracking revenue growth, gross margins, operating expenses, and whether the company consistently fulfills its value-return commitments.

Pump.fun and Hyperliquid: Same Revenue, Different Multiples—Why?

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

Barack states that, based on market data at the time of the show, Pump.fun is valued at about 5x buyback amount, while Hyperliquid and Lighter have corresponding multiples of about 30 to 40x. In his view, this gap reflects market bias against different revenue types.

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

But Barack argues that Pump.fun's performance over the past two-plus years shows its revenue is more resilient than the market initially expected. The hype around individual meme coins 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 is not to equate meme coin trading exactly with these products, but to explain a demand mechanism: even if participants collectively 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 revalue from about 5x to 10x. If business scale remains unchanged, multiple expansion alone could correspond to roughly a doubling of upside; if on-chain trading and meme coin activity recover simultaneously, revenue could grow further.

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

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

Hyperliquid, on the other hand, receives a higher valuation multiple. On one hand, its crypto perpetual contract business has already generated substantial revenue; on the other, the HIP-3 market is expanding trading to contracts related to stocks, commodities, indices, and unlisted 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, which traditional financial institutions could then use as references for issuance pricing.

But this judgment still needs market validation. According to Barack, Hyperliquid's recently added real-world asset markets have contributed significant trading volume, but because they are still in the expansion phase, they have not yet brought revenue growth of the same scale. The current high-margin business remains primarily crypto asset trading.

Therefore, Hyperliquid has stronger cyclical reflexivity than typical applications: when crypto capital flows back, HYPE may benefit not only from an overall rise in token valuations but also from simultaneous growth in platform trading volume, fees, and buyback scale; if market activity declines, this mechanism can also run in reverse.

ether.fi Has Changed, but the Market's Categorization Hasn't Caught Up

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

ether.fi initially entered the market with liquid restaking. At the peak of the restaking narrative in 2024, its fully diluted valuation once reached about $8 billion. As market expectations for the restaking sector declined, ether.fi's valuation also fell, and it continues to be viewed as an asset similar to staking protocols like Lido.

Barack believes this categorization no longer accurately reflects ether.fi's current revenue structure. According to data he provided on the show, more than 65% of its business now comes

from Neo Bank (digital new bank) products, including credit card transaction revenue and lending revenue generated when users borrow against account assets; yield and staking businesses have fallen to about 35%.

As the platform adds tokenized stocks and more on-chain assets, ether.fi is transitioning from a digital new bank to an on-chain integrated brokerage platform. Users can hold and trade different assets, borrow against their assets, and complete daily spending through credit cards.

The advantage of this model is that ether.fi does not need to build all financial infrastructure from scratch. Taking lending as an example, the platform can leverage existing DeFi protocols like Aave and earn revenue through revenue sharing. The richer the stablecoins, lending markets, and tokenized assets on Ethereum, the broader the range of services ether.fi can offer users.

According to data provided by Barack, ether.fi's daily credit card transaction volume has risen from about $300,000 a year ago to $3–4 million, an increase of more than 10x; currently only about 4% of revenue comes from lending interest, while traditional digital bank Nubank derives about 60–70% of its revenue from this segment. In his view, this shows ether.fi still has significant room to expand its revenue structure.

Based on a potential buyback amount of about $30 million over the next 12 months and a 30x valuation multiple, Barack estimates that ETHFI's price could exceed $1, roughly double its price at the time of the show. However, $30 million is higher than the $21 million forecast in another model he cited, and he assumes ether.fi's future growth may accelerate, so this result also falls into a somewhat optimistic scenario.

What is truly worth noting in this case is not the specific target price, but whether market categorization is lagging. If most of ether.fi's revenue already comes from payments, lending, and brokerage, then continuing to use the valuation framework of a liquid restaking protocol may fail to reflect its current business; but if new business growth does not sustain, the so-called "reclassification" may also fail to hold.

Fundamentals Can Reduce Correlation, but Cannot Eliminate the Crypto Cycle

Having real revenue does not mean application tokens can completely decouple from Bitcoin and the crypto market cycle.

Barack describes this relationship as "partially coupled, partially decoupled." On one hand, Venice, Pump.fun, Hyperliquid, and ether.fi can rely on their own user growth, revenue, and buybacks to establish a relatively independent valuation basis. Even if Bitcoin trades sideways, as long as business continues to expand, tokens may still be revalued.

On the other hand, they still belong to crypto assets. When capital flows back into tokens from stocks, AI, and other markets, these fundamentally supported projects may be among the first to enter professional investors' allocation scope. Pump.fun and Hyperliquid will also earn additional revenue from increased trading activity, creating positive feedback between asset prices and business fundamentals.

Venice's direct link to the crypto trading cycle is relatively weak; its main external variable is AI usage. If multi-model access, privacy AI, and generative applications continue to grow, Venice may have a demand source different from pure crypto applications; if user growth or paid conversion falls short of expectations, its token will not automatically achieve the model's valuation just because the crypto market rises.

Barack ultimately places this change within a longer industry cycle. According to data he cites, for most of the crypto industry's history, execution-layer infrastructure once contributed more than 95% of industry revenue; today, application revenue has risen to about two-thirds. He expects this proportion to continue tilting toward the application side, eventually exceeding 90%.

This prediction has not yet become fact, but it points to the core variables that need to be verified in the next phase: whether revenue continues to migrate from public chains and execution layers to user-facing applications, whether cash flow generated by applications can be reliably transmitted to tokens, and whether buyback mechanisms can maintain continuity amid business growth, market downturns, and regulatory changes.

If these conditions hold, the main valuation targets in the crypto market may shift from "infrastructure providing block space" to "applications using blockchain to sell financial and digital services." At that point, the market will no longer be looking for just the next high-performance public chain, but for which products truly connect the crypto world with external demand, and which tokens can sustainably share in that growth.