Why Hyperliquid & Tron Might Be the Most Undervalued Chains in Crypto | Raoul Pal ft Jamie Coutts

Hyperliquid and Tron are identified as potentially the most undervalued blockchain platforms due to their low valuation multiples when compared to their fee generation, despite Hyperliquid's growing network effects.

Hyperliquid and Tron are significantly undervalued compared to other major smart contract platforms like Solana and Ethereum, based on their revenue multiples. While Tron's low valuation might reflect market perceived risk, Hyperliquid's shift from a single application to a network with other protocols building on it suggests it should be valued more on network effects, indicating substantial growth potential. Traditional finance firms entering crypto are expected to identify and invest in these 'growth at a reasonable price' opportunities, which current DeFi protocols often represent.

Revenue-based Valuation

• 00:00:05 Valuation methods for revenue-generating applications shift away from Metcalfe's law towards more traditional models. Hyperliquid and Tron stand out as the cheapest smart contract platforms when valued by fees or revenues, trading at significantly lower multiples (11-12 times for Hyperliquid, 6-7 times for Tron) compared to Solana (100-200 times) and Ethereum (300-400 times).

Hyperliquid's Undervaluation

• 00:01:43 Hyperliquid, initially an application, has evolved into a chain with growing network effects, with other protocols like More Photo building on it. Despite this, its valuation is currently based on revenue multiples rather than network effects, suggesting it is significantly undervalued and should be valued similarly to fast-growing networks like Amazon was in its early stages.

Tron's Valuation & Risk

• 00:01:33 Tron's extremely low valuation, trading at only six or seven times fees, is likely attributed to the market pricing in perceived risks associated with its network. This rational approach by the market acknowledges the inherent uncertainties or challenges unique to Tron, despite its high fee generation.

GARP Strategy in Crypto

• 00:02:49 Traditional finance entities, such as Franklin Templeton, are expected to identify 'Growth At a Reasonable Price' (GARP) opportunities within the crypto space. They will likely be attracted to high-growth DeFi protocols and smart contract platforms that trade at reasonable multiples (5-20 times fees), enabling a justifiable thesis around valuation that appeals to traditional investment strategies.