by Felix Machart and Mateusz Dominiak – November 21, 2025

A central question has emerged for DeFi investors and founders alike: Do fundamentals truly matter when it comes to DeFi token valuations, or are prices still largely driven by speculation and broader crypto market sentiment? As the space matures and institutional participation grows, there is an increasing expectation that price discovery will begin to reflect real usage and revenue, much like traditional equity markets eventually anchor to fundamentals. To explore this, we developed quantitative models based on a broad dataset to systematically analyze whether, when, and how fundamentals play a role in DeFi. The models reveal patterns supporting the current “revenue meta” narrative gaining traction across the ecosystem.

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Key takeaways

Do fundamentals drive DeFi valuations?

1. Yes, fundamentals do drive valuations in DeFi. Their influence has grown over time (2021–25).
2. Our modeling shows that incorporating fundamental metrics (e.g., Total Value Locked, active users, protocol fees) into baseline “market-only” models (based solely on BTC & ETH prices) yields slight decreases in 1-month (1M) market cap growth estimates, improvements over 3-month horizons (3M), and substantial improvements over 6-month horizons (6M). 
3. Notably, by 2024-2025, at 6M windows, models based on fundamentals alone outperform market-only models by an average of +8.66 percentage points, explaining up to 88% of DeFi valuation growth.
4. These delayed uplifts in fundamentals’ explanatory power can indicate both inefficiency and rational caution (waiting for persistence; short-term traction growth is often temporary and incentive-driven).
   1. Qualitative factors and strategic positioning remain essential to interpret fundamentals.
   2. Alpha opportunities for those who combine quantitative + qualitative analysis.
5. While fundamentals used to be strongest in flat or bull markets, in 2024-25, they also drive performance in bearish periods.
   

Which fundamental KPIs explain valuations to what extent?

1. TVL and protocol fees co-lead the leaderboard in terms of importance for model weights 2024-25 (~19.7% and 19.2% feature importance, respectively), with protocol revenue and DEX trading volume rising sharply in explanatory power for valuation changes.
2. Social-sentiment benchmarking: Adding Crypto Twitter followers to the market model modestly improved accuracy in some windows, but it has not beaten fundamentals-only since mid-2024 and market+fundamentals since early 2023 (6M horizon).
3. The shift toward sustainable fee/revenue signals points to a maturing DeFi market with investors increasingly focusing on onchain cash flows over narratives.

Digging deeper: What the data tells us

From the outset, our conviction in crypto networks and decentralized finance has been rooted in their potential to build an internet-native financial system (IFS) on public, permissionless blockchains. By reducing fragmentation, enhancing property rights, enabling permissionless innovation, and leveraging automation and cryptographic verifiability, DeFi promises a radically more efficient, transparent, and inclusive financial infrastructure.

Given these properties, one would expect DeFi markets to reflect a high degree of efficiency, where asset prices incorporate all available onchain data, from usage statistics to protocol revenue. However, in practice, market behavior has been heavily influenced by memes, narratives, and macro liquidity cycles, often overshadowing project-specific fundamentals.

As the industry matures and with increased institutional participation, one expects price discovery to gradually reward projects with real adoption and revenue, echoing how equity markets eventually anchor to fundamentals. Our research aims to empirically assess whether this transition is happening. By analyzing 2021-2025 performance using machine learning models, we find compelling evidence that the market is increasingly pricing in protocol fundamentals, especially over longer time horizons.

Influence of fundamentals and market pricing efficiency

Our analysis finds that fundamentals do drive valuations, but their impact varies greatly by time horizon. We show that adding fundamental metrics (e.g., TVL, active users, protocol fees) to a market‑only baseline yields no reliable improvement at 1M (–0.73 pp on average since Jan‑2024), but adds +2.12 pp at 3M and +8.66 pp at 6M. Market cap growth is estimated based on same period fundamentals growth and compared against actuals to assess their influence.

After re-emerging in the late-2022 post-crash period, their signal has strengthened steadily (in the brutal 2022 bear market beta-dominated). 

In test periods beginning in early 2024 and from mid-2024 to mid-2025, the fundamentals-only model explains an average of 8.66 and 12.05 percentage points (pp) more variance (R²) than the market-only baseline at the six-month horizon, respectively. It outperforms all other models, as market beta introduces noise, reversing earlier patterns (see first chart for all models and second chart for fundamentals-only uplifts over the market-only baseline). Notably, while adding Crypto Twitter followers to the market model modestly improved accuracy in some windows, it did not beat fundamentals-only since mid-2024 and market+fundamentals since early 2023, so fundamentals clearly beat narrative.

While previously fundamentals mainly outperformed in flat and to a lesser extent in bull regimes, they have added a significantly increased signal in more recent bearish phases (see the change in fundamentals-only uplifts in the chart above).

While DeFi markets are increasingly driven by fundamentals, they do not price signals nearly at real-time speed as theoretically enabled. Substantial pricing delays in fully assimilating onchain data are evident in the fact that at the shorter horizons tested, the outperformance of models including fundamentals represents an average -0.7 pp at the 1-month and +2.1 pp at the 3-month horizon. Those being significantly below the added signal at the 6-month horizon could indicate inefficiencies. A more compelling interpretation, however, is that this lag is not purely a sign of inefficiency. Short-term fluctuations in fundamentals can be noisy or temporary (especially given token incentives), so it may be rational to wait to see whether such trends persist and have sticky traction before adjusting valuations. Also, qualitative factors, such as strategic positioning, product velocity and defensibility that indicate how KPIs might evolve in the future are often not evident in quantitative metrics, albeit critical for mid- to long-term performance. This is true to even greater extents at an early and growth stage where valuations depend even more on future growth and thus predictions thereof. Either way, these delays in fundamentals being priced in, whether due to inefficiency or rational behavior, provide opportunities for investors to blend fundamental analysis of quantitative and qualitative factors to generate alpha.

Ultimately, we do expect the trajectory toward improved efficiency to continue with further institutional participation and advanced analytics. We will, however, likely continue to see time lags and volatility both due to rational reasons as well as behavioral biases and speculative episodes.

Evolving fundamental drivers (2024-2025)

The most influential fundamental drivers for the 6M horizon evolved notably by 2024-2025, shifting emphasis from pure liquidity metrics toward sustainable economic indicators:

1. TVL and protocol fees now co-lead the 6M fundamentals-only model (19.7% and 19.2% feature importance – FI –, respectively).
2. Protocol revenue has risen to a solid third place (15.7% FI).
3. A balanced second tier consists of DAU (13.9%), daily transactions (12.4%), and DEX volumes (11.8%).

This trend signifies a maturing market that increasingly values sustainable revenue generation over pure liquidity inflows and usage spikes.

Read, write and re-price with increasing efficiency

Investors should increasingly emphasize not only long-term fundamentals, particularly TVL, protocol fees and protocol revenue, but also strategic considerations, to capture delayed market repricing opportunities. For DeFi founders, demonstrating sustainable, verifiable economic value and actively retaining users will be crucial as market sophistication and competitive differentiation increase.

Ultimately, while DeFi markets have evolved substantially, real-time onchain data is not being priced-in as swiftly as one could think. We believe this has to a large extent rational reasons, yet there is room for improvement in information processing. Since we expect the market to mature even further and become increasingly more efficient and believe it is essential in order to live up to its true potential of an open, decentralized, verifiable, internet-native financial system, we will continue pushing the industry forward via research (incl. further model iterations) and supporting the builders that lead the change. Reach out to collaborate!

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