Layer-1 Valuations Decouple As Fundamentals Weaken

In that model, the flow is straightforward as every step in the stack depends on the native asset. Dollars flowed into a centralized venue, were converted into the L1 native coin, and from there into the ecosystem. The native token is needed for gas, serves as the unit for markets’ quoted pairs, and is held as treasury or collateral because everything is native-denominated. Eventually, capital cycles back into dollars, but the native token intermediates almost every action in between.

Under this lens, a token can be “expensive” on traditional metrics and still look reasonable if its "moneyness" is strong enough. This is the logic that has underpinned Bitcoin’s investment case: a scarce asset with a credible claim to store-of-value status and a unique tail-risk hedge against the monetary system.

For Bitcoin, monetary premium is a central driver if not the entire point. But for most other L1s, that premise is now under pressure and much harder to defend.

The erosion of the monetary premium 

Beyond BTC, native L1 tokens still have important governance, collateral and speculative roles. They secure the chain, gate protocol control, and remain the canonical way to leverage into that ecosystem’s beta. But their monetary role is fading.

For the sake of global adoption, a key structural shift comes from what the industry now calls abstraction. Gas demand, even if it continues behind the scenes, is now a tiny transactional flow with aggregate fee spend negligible relative to where it stood a few years ago. Monetary premium, by contrast, is about the willingness to hold the native token as money in that ecosystem.

Abstraction weakens this as more applications push the native asset into the background. The practical unit of account drifts toward stablecoins, and users increasingly move directly from dollars into stables back and forth, rather than through the old USD-to-native-to-ecosystem loop. The native token remains required at the infrastructure layer, but it is no longer central to the user's journey, and structural holdings can increasingly sit in stables.

In that world, the once-standard argument that “everyone must sit in ETH to use Ethereum," and by extension that most L1 natives deserve a large, durable monetary premium, is much weaker than it used to be.

Against that backdrop, the natural question is what actually drives valuations today. For the largest L1s, the dominant driver has shifted from monetary to macro-ecosystem premium. In this regime, valuations decouple from narrow fundamentals like fee capture as native assets start to be increasingly priced as broad index bets on their networks’ economic output and on their ability to remain core venues for future activity. What matters less is how efficiently the protocol monetizes each unit of usage and more whether the chain can repeatedly host the next wave of growth.

The Valuation–Revenue Decoupling

L1s are now confronting a structural break in their valuation dynamics. The old “fee flywheel” playbook, in which rising usage drove rising revenues and therefore justified rising market caps, works convincingly on the way up but breaks on the way down.

(Source: Token Terminal, DefiLlama)

The data reveals a clear evolution in how L1 valuations have behaved over the past cycles:

• 2021: Aggregate L1 Price-to-Fees (P/F) multiples appeared relatively contained because sector-wide fees were exceptionally high, compressing the overall ratio. Yet a closer look shows several individual L1s trading at clear extremes, reaching lofty fully diluted valuations on only modest revenue capture. In hindsight, it was the expression of the late-cycle monetary premium era.
• 2022: The adjustment came abruptly. The bear market drove annualized fees down more than 90% from their peak, mechanically inflating P/F multiples as the revenue base evaporated.
• 2023: As the market recovered, fundamentals rebounded over three times faster than valuations, allowing the sector P/F ratio to compress from roughly 155x to about 85x. This demonstrated that the old valuation logic still held: higher revenues supported the valuation advance.
• 2024: The tone shifted. Both fees and valuations rose, but the latter began to outpace revenue growth, pushing P/F back into the mid-90s and hinting at the beginning of a structural break.
• 2025: The regime shift crystallized. The sector preserved almost all of its market capitalization year-over-year while surrendering almost half of its revenue base. This re-rated the sector-wide P/F ratio to 170x as sticky valuations amid shrinking fundamentals now define the regime.

(Source: Token Terminal, DefiLlama)

A second structural insight comes from the distribution of fee generation. Two outliers, Tron and (from 2025 onward) Hyperliquid, now dominate fee production while capturing only a marginal share of total valuation. They operate as the sector’s antithesis, establishing themselves as real profit machines priced like low-growth traditional utilities. In 2025, both produced more than 80% of total fees while accounting for less than 9% in sector-aggregated valuation.

Even more striking is that over the past two years, Tron alone delivered nearly half of all annualized fees in the L1 proxy basket. Removing Tron from the dataset makes the trend evident: sector P/F jumps from 94.5x to 145.7x in 2024, and from 170.1x to 385.1x in 2025. The “cheapness” of L1 valuations is, in practice, an artifact of one chain monetizing stablecoin transfers exceptionally well—Tron being Tether’s house.

Meanwhile, the networks that anchor valuation, Ethereum, Solana and BNB Chain, are not the ones capturing most of the fees. They are increasingly priced as macro assets, where narrative, structural relevance and ecosystem optionality carry more weight than protocol revenue.

Leaders emerge as macro assets 

A small leading group of L1s, the triplet highlighted above, has increasingly separated from the broader set. Excluding Tron and Hyperliquid, whose fee profiles distort the index, these three chains now function less as transactional networks valued on gas revenue and more as macro assets whose valuations reflect structural relevance, liquidity dominance and ecosystem optionality.

From 2021 through 2023, Ethereum alone captured roughly 70% of all L1 fee revenue. That equilibrium broke in 2024 and 2025 as new, fast-growing ecosystems rose to prominence. Excluding Tron and Hyperliquid from the dataset, Ethereum and Solana each accounted for close to half of the fee base in 2024. By 2025, BNB joined them as a third pillar, the three of them generating 85.5% of annualized fees in the selected L1 universe. Their dominance in valuation is even more revealing: the same three assets represent more than 80% of the sector’s aggregate market capitalization.

This concentration comes despite a severe contraction in underlying fundamentals. Annualized fees for both Ethereum and Solana have fallen by more than 90% from their peaks, though for different reasons. Ethereum’s shift toward rollup-centric scaling has reduced fee capture and redirected activity to L2s, while Solana’s retracement reflected the fading of speculative momentum in memecoins and NFTs.

Their valuation multiples expanded accordingly, Ethereum and Solana’s P/F rising ~8× and ~7× respectively year-over-year, as prices marginally mean-reverted but remained nowhere near aligned with the scale of the revenue collapse. BNB follows a similar pattern in slower motion. Between 2022 and 2025, its fully diluted market capitalization increased roughly 2.6 times while its fee base declined by about 35%, lifting its P/F multiple from 179x to 728x.

What binds Ethereum, Solana and BNB together is not fee capture but their evolution into "macro assets". Structural roles in the crypto economy sustain their valuations: Ethereum dominating in RWA and DeFi segments alongside its collateral premium in the latter; Solana through high-velocity onchain trading and consumer-scale applications; and BNB through its large captive user base, exchange integration and distribution funnel. These assets are increasingly priced on ecosystem throughput, narrative relevance and liquidity gravity rather than raw fee production.

(Source: Token Terminal, DefiLlama)

Cross-chain activity confirms this shift. Over the past two years, more than 90% of DEX volume across the selected L1s has flowed through Ethereum, Solana and BNB, with a rough split of 40/40/20 as Ethereum’s dominance has gradually faded. This is where capital circulates, projects launch, and users transact. It is also where “ecosystem GDP”, a proxy for value created on top of the base layer, continues to accumulate.

Fee generation alone is not sufficient anymore to sustain premium valuations, and it becomes almost irrelevant when it falls outside the prevailing narrative. The assets that win flow, users and mindshare become macro assets; those that cannot anchor themselves in a structural role are left to underperform, regardless of how much revenue they generate.

(Source: Token Terminal)

(Source: Token Terminal, performance from 31.12.23 to 30.11.25)

The new selectivity

Out of the wider L1 universe, only a handful continue to justify a premium. The market does not reward growth uniformly; it selectively rewards narratives. This selectivity becomes even clearer when looking at user growth. Despite sustained inflows into the asset class, most L1s show little evidence of a corresponding expansion in monthly active users (MAU) or economic activity.

From 2024 onward, most fresh liquidity is entering through ETFs, DATs and off-chain wrapped vehicles rather than through native onchain usage, supporting valuations without meaningfully lifting the underlying metrics. In effect, prices are already discounting an eventual billion-user base, a scale that the current data does not yet support.

Flows now re-rate assets long before fundamentals respond because only a fraction of ETF and DAT inflows ever reaches onchain usage. As a result, L1s that lack strong narratives, liquidity channels or ecosystem pull are increasingly left behind, while those with structural demand, access to regulated flow and credible future optionality continue to command the premium. A natural selection dynamic is unfolding, where liquidity attention, rather than underlying cash flows, dictates valuations.