AltcoinsOpinionMarkets
|10 min ReadToken Fantasy Ends as DeFi Faces Cash-Flow Test
Maya Chen
Senior Analyst
Published
Jan 16, 2026
Alpha Briefing: The wild token boom has flipped into a survival test, as altcoins drown in supply, retail walks away, and capital chases real cash flows instead. DeFi tokens that channel serious protocol income, like Hyperliquid with holders revenue regularly above $100 million a month and Jupiter paying out yields near 25 percent of circulating market cap, are setting a new standard. Everything else is slowly being repriced toward zero.
For years, crypto ran on a simple dream. Throw money at tokens, wait a cycle, watch your bag go up. That day is over. The industry is finally facing what Patrick Scott of Dynamo DeFi calls a day of reckoning, where tokens are either tied to real business income or they are just beautifully branded memecoins.
He argues that for the past five years, most tokens lived off what he politely calls speculative demand in excess of fundamentals. In plain language, they were overvalued. There were not enough liquid assets with real fundamentals in this industry, so investors piled into whatever they could get. That meant Bitcoin and a sea of altcoins. Add in retail gamblers chasing Bitcoin-millionaire stories on smaller names, and you get massive demand with very little fundamental supply.
In that world, the first-order effect was easy. If you bought almost anything when sentiment was low and held for a few years, you made incredible returns. The second-order effect was more dangerous. Many teams stopped thinking like businesses at all. Their core business model became selling their own tokens, not building revenue streams from actual products.
Altcoin Flood Breaks the Old Playbook
Scott points to three shifts that blew up the old altcoin game.
First, memecoin factories like Pump.fun and other launchpads turned token creation into a commodity. Anyone could launch. Every day this year, there were days with more than 50,000 new tokens launching on Pump alone. Attention was chopped up across millions of tiny assets, and the usual wealth effect from Bitcoin halvings could not concentrate into the top few thousand tokens like before.
Second, a new class of crypto assets started to show real fundamentals. Tokens like HYPE and fresh equity IPOs like CRCL offer investors something different. They are backed by businesses with visible income. It becomes hard to bet on whitepapers when you can buy tokens and stocks tied to actual revenue.
Hyperliquid is one example. Its holders revenue regularly surpasses 100 million dollars in a single month, which is tremendous by any standard.
Third, tech equities stole the spotlight. Stocks tied to AI, robotics, biotech and quantum computing did something that many altcoins failed to do. They outperformed, and they did it while looking like lower risk to many retail investors. Even the Nasdaq has outpaced both Bitcoin and altcoins year to date.
The result of those three shocks is simple. You now have a graveyard of underperforming altcoins, teams fighting over an ever smaller pool of capital, and seasoned crypto investors running around like headless chickens, unsure how to play this new regime.
Scott’s core line is blunt. At the end of the day, tokens either provide a stake in a business or are valueless. They are not magical objects that gain value by existing or by chanting the word community. Network coins like BTC sit closer to commodities, so his critique is mainly about protocol tokens.
Many people push back and say some tokens are pure utility, or that protocols have both a token and equity, so things are different. His answer is just as blunt. Those tokens still represent future cash flows. It just happens that for many of them, those cash flows are exactly zero.
In his view, the only DeFi tokens that will hold meaningful value going forward are pseudo-equity. They will give holders claims on protocol income, and the protocol will have enough income to make that claim worth something.
Retail Walks Away While AI Becomes the New Dream
There is another problem. Retail is exhausted.
Scott argues that retail buyers are done with most tokens for now. They are tired of losing money. Tokens inflated on promises that never came true. Memecoin launchpads flooded the market with new names. Extractive tokenomics and an industry that tolerated obvious trash led to one rational conclusion. Retail investors correctly believe the game is set up for them to lose.
So the gambling energy moved. Instead of altcoins, they play sports betting, prediction markets, and stock options. None of these are necessarily safer, but in their minds, they look less rigged than many new token launches.
Leading KOLs post that crime is legal, then act surprised when people do not want to play a game that looks like legalized crime. You cannot blame retail for walking away from that.
You can see the apathy in the data. The hype of this cycle never reached the fever of 2021, even though fundamentals are stronger and regulatory risk is lower. Interest in crypto on search engines has lagged.
AI made it worse for crypto. ChatGPT and the AI boom gave the world a very visible killer product. People see AI reshaping their lives every day. For a decade, crypto fans said this was the new dot-com moment. That story is harder to sell when AI is delivering the obvious dot-com moment in front of everyone’s eyes.
If you compare search interest in crypto to AI, crypto only briefly pulled ahead around the FTX collapse. Outside of that, AI dominates.
Could retail come back to altcoins in size? Yes, but not for vague narratives. Scott argues they will only return when they feel they have a reasonable shot to win. Some of that energy is already back in prediction markets today. People are buying binary options on things like government shutdown deadlines. To bring that capital back to tokens, the market has to show them clear, credible upside again.
In This Market, Tokens Are Either Equity Or Zero
Strip away the noise and the game looks simple. In a world where tokens cannot count on endless speculative buyers, they have to stand on their own value. After half a decade of experimentation, Scott says there is basically one meaningful form of value accrual. Tokens need claims on protocol income, whether that income is in the past, present or future.
Different models all reduce to the same thing. Dividends, buybacks, fee burns and treasury control are just four different ways of pointing token holders toward protocol income or protocol assets. The mechanism can vary. The economics do not.
This does not mean every protocol has to pay out today. Scott has said in the past that sometimes the smarter move is to reinvest instead of rushing into buybacks. The key is optionality. There needs to be a clear switch that can turn on real value accrual later, ideally via governance or defined milestones. Ambiguous vibes are no longer enough.
The good news for serious investors is that the fundamentals are not hidden. Platforms like DefiLlama let you see revenues and holder returns for thousands of protocols.
A quick look at the top protocols by 30-day revenue shows a clear pattern. Stablecoin issuers and derivatives platforms dominate. Launchpads, trading apps, CDPs, wallets, DEXs and lending protocols also show up, but the big money clusters where you would expect it.
Scott draws a few simple conclusions from that list. Stablecoins and perpetuals are the two most profitable businesses in crypto right now. Trading more broadly is a very profitable line of business, although he warns that trading revenues are at risk if the market falls into a long bear. That is one reason he finds experiments like Hyperliquid’s push into real-world assets interesting.
He also highlights distribution. Controlling the front door is just as important as owning the primitive. Hardcore DeFi users spent years saying trading apps and wallets would never make the most money because people could save fees by using protocols directly. In the real world, apps like Axiom and Phantom are hugely profitable.
The bigger message is that some crypto apps now generate tens of millions of dollars in monthly revenue. If your favorite protocol is not there yet, that might be fine. It takes time to build something the market will pay for. Scott notes that himself, since he runs revenue at DefiLlama. But there has to be a path to profitability. Playtime is over.
How Value Investors Are Picking Survivors
If the new game is value-based, you need a new framework for picking winners.
Scott suggests that strong performers over the next few years will share three traits. They will either already have clear claims on protocol income or a very transparent path to those claims. They will show consistent, growing revenue and earnings. Their market caps will trade at reasonable multiples to past revenues, not at fantasy valuations.
Instead of staying abstract, he points to concrete examples.
Curve Finance has delivered steady, consistent revenue growth over the past three years even while its fully diluted valuation has fallen. The result is an FDV that sits below eight times Curve’s annualized revenue from the past month. Because of bribes to locked Curve stakers and a long release schedule, the effective yield to token holders is even higher. The key question now is whether Curve can maintain that revenue in coming months.
Jupiter is another case. It has become one of the big winners of the Solana ecosystem boom. It is the most used DEX aggregator and perp DEX on that chain. The team has also made strategic acquisitions so they can use their distribution muscle to expand into other onchain markets. According to Scott, annualized revenue that flows to token holders is close to 25 percent of circulating market cap and more than 10 percent of FDV.
He stresses that he holds no positions in either Curve or Jupiter. They are examples, not recommendations. Team quality, competition and many other factors still matter before placing a trade.
Other protocols that he says currently fit the same basic criteria include Hyperliquid, Sky, Aerodrome and Pendle. The list will change over time. The filter will not. In this new regime, tokens are either tied to cash and real businesses, or they slowly drift toward zero while investors move on.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.