From ETH to SOL: Why Can't L1s Still Match Bitcoin's Depth of Consensus?

The valuation of the crypto market is mainly driven by “monetary premium,” with BTC firmly holding its dominant position. While alternative L1s rely on this narrative to maintain high valuations, a lack of substantial revenue and long-term underperformance compared to BTC are eroding market confidence; in the future, L1 valuations are likely to continue compressing, with market share flowing toward Bitcoin. This article is sourced from a Messari piece, organized, translated, and written by BlockTempo. (Context: US September core PCE below expectations, “inflation under control”! Bitcoin rebounds to break through $91,000, Ethereum stands above $3100 ) (Background: Is a December rate cut confirmed? Fed mouthpiece: inflation data rising moderately)

Refocusing the discussion on why “cryptocurrency” itself is important is because this is the position most capital in the industry seeks to acquire. The current total crypto market cap is $3.26 trillion, with BTC accounting for $1.80 trillion, or 55%.

Of the remaining $1.45 trillion, about $830 billion is concentrated in alternative layer-1 blockchains (L1s). In total, about $2.63 trillion, or roughly 81% of all crypto capital, is allocated to assets that the market either already views as money or believes can accumulate a monetary premium.

Given this, whether you are a trader, investor, capital allocator, or builder, understanding how the market assigns and withdraws monetary premium is crucial. In crypto, nothing affects valuation more than whether the market is willing (or not) to treat an asset as money.

Therefore, predicting where future monetary premium will flow is arguably the single most important input variable in crypto portfolio construction.

So far, we’ve mostly focused on BTC, but it’s also worth discussing the other $830 billion worth of assets that “may or may not be money.” As previously mentioned, we expect BTC to continue capturing market share from gold and other non-sovereign stores of value in the coming years.

But what does this mean for L1s? Will a rising tide lift all boats, or will BTC partially close its gap with gold by siphoning monetary premium from alternative L1s?

First, it’s helpful to look at the current state of L1 valuations. The top four L1s have a combined market cap of $686.58 billion, accounting for 83% of the alternative L1 sector.

ETH ($361.15 billion) XRP ($130.11 billion) BNB ($120.64 billion) SOL ($74.68 billion)

After the top four, valuations drop off quickly (TRX at $26.67 billion), but interestingly, the long tail remains quite significant. L1s outside the top 15 collectively hold $18.06 billion in market cap, accounting for 2% of the entire alternative L1 market cap.

Importantly, L1 market caps do not simply reflect implied monetary premium. There are three main L1 valuation frameworks:

• Monetary premium
• Real economic value
• Demand for economic security

Therefore, a project’s market cap is not just the result of the market viewing it as money.

L1 valuations are driven by monetary premium, not revenue

Despite these competing valuation frameworks, the market is increasingly evaluating L1s through the lens of monetary premium rather than revenue-driven perspectives. Over the past few years, the collective price-to-sales (P/S) ratio for all L1s with market caps over $1 billion has remained relatively stable, typically between 150x and 200x.

However, this overall figure is misleading because it includes TRON and Hyperliquid. Over the past 30 days, TRX and HYPE generated 70% of the group’s revenue but account for only 4% of the market cap.

Once these two outliers are removed, the real picture becomes clear: even as revenue declines, L1 valuations have continued to rise.

The adjusted P/S ratio has kept climbing:

• November 30, 2021 – 40x
• November 30, 2022 – 212x
• November 30, 2023 – 137x
• November 30, 2024 – 205x
• November 30, 2025 – 536x

An explanation based on REV (real economic value) might argue that the market is simply pricing in future revenue growth. However, this explanation does not hold up to basic scrutiny. In the same L1 basket (still excluding TRON and Hyperliquid), revenue has declined every year except one:

• 2021 – $12.33 billion
• 2022 – $4.89 billion (down 60% YoY)
• 2023 – $2.72 billion (down 44% YoY)
• 2024 – $3.55 billion (up 31% YoY)
• 2025 – $1.70 billion (annualized, down 52% YoY)

In our view, the simplest and most straightforward explanation is that these valuations are driven by monetary premium, not by current or future revenue.

L1s continue to underperform Bitcoin

If L1 valuations are driven by expectations of monetary premium, the next step is to understand what shapes those expectations. A simple test is to compare their price performance to BTC.

If expectations for monetary premium are mainly a reflection of BTC’s price movement, then these assets should act like BTC beta (moving with the broader market). On the other hand, if monetary premium expectations are driven by unique factors for each L1, we would expect their correlation with BTC to be much weaker and their performance more distinct.

As a proxy for L1s, we looked at the performance of the top 10 L1 tokens (excluding HYPE) versus BTC since December 1, 2022. These ten assets make up about 94% of L1 market cap, so they provide a representative picture of the sector. During this period, eight out of ten assets underperformed BTC on an absolute basis. Six of them lagged by 40% or more. Only two assets outperformed BTC: XRP and SOL. XRP’s lead was only 3%, and given that XRP’s flows have historically been retail-driven, we don’t read too much into that. The only asset with significant outperformance was SOL, beating BTC by 87%.

Digging deeper into SOL’s outperformance, it actually seems underwhelming. During the same period that SOL outperformed BTC by 87%, Solana’s fundamentals saw parabolic growth. DeFi total value locked (TVL) grew by 2,988%, fees increased by 1,983%, and DEX volume soared by 3,301%. By any reasonable standard, the Solana ecosystem has grown 20-30x since the end of 2022. Yet the asset meant to capture this growth, SOL, only outperformed BTC by 87%.

To significantly outperform BTC, an L1 …