The FTX bank run and collapse created illiquid conditions that unevenly impacted digital asset returns. However, the crisis did not change fundamental value drivers for some digital protocols. Assets hit especially hard by illiquidity and produce fundamental value will improve compared to assets that fared better over the last few weeks.
Protocol user fees demonstrate protocol usage and potentially token demand. The market-cap-to-annualized-protocol-fees ratio makes fees comparable across assets. Total fees over the last 30 days indicate protocol usage through the FTX collapse. Protocols that earned fees after the FTX venue disappeared demonstrate usefulness, at least, and strong user retention, at best.
Not every project with low valuation multiples represents a value opportunity, even if impacted by illiquidity. Fees are unrelated to projects with low usage or that do not accrue value to token holders, stakers, or community participants.
Platforms with established communities, developers, and provide novel solutions can be priced relative to their protocol fees. Among the top assets, Lido, GMX, Convex, LooksRare, and Synapse fit the criteria. These token returns were impacted by illiquidity and their tokens are undervalued relative to other top assets like BTC, ETH, and others.
Each of these projects accrue value from protocol usage with unique or defensible market positions:
These projects demonstrate value resilient to market risks. However, each has specific risks, like development quality. Competition in digital assets is uniquely risky because the industry’s open-source structure compounds innovation. Projects that innovate and mitigate idiosyncratic risks will perform through market cycles. These projects are starting points to find opportunities as the market moves past the FTX crisis.