Investor Santiago Santos Argues L1 Tokens Are Overvalued
Investor Santiago Santos has stated there is a significant valuation disconnect in crypto, with infrastructure tokens like L1s being overvalued compared to the revenue they generate. He argued that tokens are flawed investment instruments for long-term compounding and that real value will accrue to DeFi applications and companies using crypto infrastructure. Santos suggested that themes like stablecoins and real-world asset tokenization are higher-conviction investments.
- Data from January 2026 shows top DeFi applications generating five times more in fees than the underlying blockchains. In a recent 30-day period, the top 17 fee-generating entities were all applications; Solana was the only L1 in the top 20 with $20.4 million in fees, while Ethereum ranked 27th with $10.3 million. - Santos's core argument is that tokens lack a capital compounding mechanism; unlike corporate equity where management reinvests free cash flow to grow the business, protocol fees are simply paid out to stakers and do not compound within the ecosystem. - The stablecoin market, a sector Santos favors, saw its total supply exceed $300 billion in late 2025 after adding nearly $100 billion that year alone. Annual on-chain stablecoin transaction volume hit a record $33 trillion in 2025, rivaling the volume of payment giants like Visa. - The market capitalization for tokenized Real-World Assets (RWAs) currently stands at over $25 billion. - On-chain data from January 6, 2026, showed Solana's daily DEX volume hitting nearly $3.8 billion, more than the combined volume of Ethereum ($1.7 billion) and Base ($1.2 billion) for the same period. This activity is largely driven by memecoin trading on DEXs like Raydium. - The AI x memecoin narrative continues to produce new projects on Solana. Goatseus Maximus (GOAT), launched in October 2024, is credited with popularizing the trend after climbing over 1,900%, while another project, Fartcoin (FARTCOIN), quickly reached a market cap of over $176 million after its launch. - Solana's network activity hit a record high of 148 million non-vote transactions on January 30, 2026. Analysts noted the weekly transaction volume was comparable to what the Ethereum network processed over the past two years.
