[Serenity Premium] Curve's Valuation Recap post-Michael's $140m Liquidation [3rd Review Jun 2024]

We have always been covering Curve and its affiliated protocols and keeping an eye on the major events affecting its operations. Last year, we published an article discussing the $CRV valuation dated Sept 2023. In that article, we have concluded that "there will be price pressure in the quantum of a few percent on CRV to make it below $0.50 level" duel largely to the $CRV inflation. In addition, we mentioned that looking forward, $CRV "would justify a veCRV market cap of $686m, or $0.74 per CRV for 922M CRV in veCRV", due to strong earning potentials from $crvUSD.

This article reviews the analysis made 9 months back and makes important adjustments to valuation assumption, taking into account more of the supply-demand situation of $CRV.

Recap of the Curve Valution Methodology

We proposed a few ways of how to value Curve back then, but over the past several months, it seems to be that crypto space is gradually adopting a valuation and yield computation method based on the staked portion of the tokens. For instance, it has been long that the yield of ETH refers to the yield on the staked Beacon Chain ETHs, not the entire ETH supply. The newly launched stablecoin project Ethena also spells clearly protocol yields go to staked USDe and the circulating USDe is not yield bearing. Curve Finance's $crv has used the staking (yield bearing veCRV) and non-staking (normal CRV) structure since its inception in 2020. So revisiting this issue, at least we can comfortably now use staked CRV (veCRV) as a valuation reference point.

Out of the total 2,131 million CRV in circulation per Coingecko, there are 785m locked into veCRV per the official dashboard. Based on the market price of $0.34 today, the veCRV valuation is $267m.

On the earning side, according to Use CRV dashboard, last 13 weeks's fees to veCRV holders amount to $8.7m (annualised to be $35m), including crvUSD borrowing interests paid and trading fee split to veCRV holders. Curve Monitor below gives similar numbers but slightly lower (the deep and light blue bars). This gives a yield of 13% ($267m/$35m) or P/E ratio of 7.6x times. As a reference, the P/E ratio of MakerDAO is about 12x.