Joestar
Crypto Analyst, DeFi Analytics Tools Builder, Perpetuals & Tokenization
Sky Protocol's SKY is undervalued because the market still has not caught up with its rebrand from Maker. It ranks 9th in revenue across all protocols, yet is not worth far more than Aave or Morpho. It buys back over 300K a day, 3x Aave, while Morpho returns nothing to holders. It will take time for people to realize how big and important it is. A vote just cut buybacks 10x for three months to focus on the protocol, a good decision. x.com x.comÂ
Sky Ecosystem's financial growth through a difficult year for crypto makes SKY stand out against other DeFi protocols, including Uniswap and Aave. Gross protocol revenue rose about 50% year over year in September, and surplus remitted to reserves swung from a $17m shortfall to $7m. Sky reports its first Stage 2 burn of 2.86m SKY; a crypto bull market could bring more growth. SKY trades around its price last September. x.comÂ
Sky, formerly MakerDAO, is ready to break out of a W pattern that ranged for years, helped by improving fundamentals, buybacks on the way and a bullish DeFi season. A break above 0.1 would send it flying without a ceiling. Its redenomination also makes the coins mentally easier to buy. x.comÂ
If Aave TVL keeps migrating to Spark after the rsETH hack, SKY is the better buy than SPK, because most of Spark's revenue goes to SKY holders. 99% of SKY's supply is unlocked versus 25% of SPK's, and Spark's volume is highly speculative while Sky has seen organic demand all year. Sky earned about $403M in fees last year versus Spark's $75M, funding $75M of SKY buybacks while SPK's have just begun. Sky trades at 10.9x sales versus Spark's 15.7x, or 61.1x on fully diluted value. x.comÂ
Sky is still badly overlooked given about $90M of annual revenue and USDS supply on a fast track to $20B outstanding. Investors who like Hyperliquid should like Sky too. x.comÂ
Aave's protocol fees do not reach token holders because Labs controls DAO governance and votes itself grants. Labs voted itself $25 million for operations and $17.5 million in performance incentives, including $5 million for launching an app. Buybacks were paused after the rsETH bridge exploit and have not resumed. Despite the protocol's quality, the Aave token is uninvestable and will keep grinding lower; unlike buyback-funded peers, holders get no direct value. x.com x.com x.com x.com x.com … Show more
Sky deserves more credit as a DeFi lender that survives crashes without socializing losses onto depositors. It has had zero lifetime bad debt since 2019, through Terra, 3AC, FTX and every ETH crash. Its Dutch auction liquidations find true market prices rather than paying a flat bonus and rebuild after failure, with SKY minting as a never-triggered last-resort backstop. RWA integration keeps revenue from vanishing when crypto dumps, a structurally different model from pool-based protocols. x.comÂ
SKY looks undervalued at a $1.5B market cap, just 0.22x the $6.71B of USDS stablecoin supply it backs. Sky holds $5.6B in TVL, 3.7 times its token market cap, and USDS is about 2.2% of the $311B stablecoin market. Sky Ecosystem has completed its first burn of 2.86M SKY bought with 5% of monthly net protocol surplus, linking protocol performance to supply reduction. x.comÂ
Tokens that fund buybacks from revenue gained another reason to catch a bid after SEC staff said buybacks alone don't make an otherwise non-security token a security once its protocol is live. More usage can mean more fees for buybacks: Hyperliquid fees buy HYPE, Raydium swap fees buy RAY, and Pump, Jupiter, PancakeSwap, Aster, NEAR, Pendle, Maple and Sky do similar. Uniswap burns UNI from pool fees; Lido's DAO buys LDO by accumulation. Buybacks must be big relative to market cap and new supply. … Show more
Lending tokens fall short of the sector's strong economics because team conduct and uneven holder returns undermine them. Lending capital is sticky and protocols have pricing power, but Aave rugged its DAO and Compound rugged. Morpho signaled no interest in buybacks; Kamino is silent. Maple's buybacks are small, about a tenth of revenue, and inconsistent. Spark buys back about half its revenue, but revenue is very inconsistent. The sector is great; these projects are not. x.comÂ
Morpho looks set to outperform Aave, with their year-to-date price performance appearing to hit an inflection point. Aave is still dealing with DAO drama and the departure of key contributors, which has overshadowed its V4 launch, and the market is pricing in that execution risk. Morpho keeps taking market share, with RWA collateral at another all-time high of $474M, per Token Terminal data. x.comÂ
