DeFi: Do Fundamentals Really Drive Valuations? An Analysis of Market Efficiency from 2021 to 2025

In recent years, decentralized finance (DeFi) has experienced exponential growth, capturing the attention of both retail and institutional investors. However, a central question continues to dominate the debate: do fundamentals truly matter in the valuation of DeFi tokens, or do speculative dynamics and the overall sentiment of the crypto market still prevail?

A recent study conducted by Felix Machart and Mateusz Dominiak, researchers at Greenfield Capital, provides an empirical answer to this question by analyzing data from 2021 to 2025 using advanced quantitative models. The results indicate that, as the sector matures, fundamentals are gaining increasing importance in price dynamics, particularly over longer time horizons.

From Memes to Fundamentals: How Price Discovery is Changing

For years, the behavior of the DeFi markets has been heavily influenced by narratives, memes, and macro liquidity cycles, often at the expense of objective data regarding protocol adoption and revenues. However, with the entry of institutional capital and increased sophistication of operators, there is a gradual transition towards a price discovery more anchored to fundamentals, similar to what occurs in traditional stock markets.

Greenfield Capital’s study employed machine learning models, specifically Random Forest, to assess whether and how fundamentals impact DeFi valuations. The metrics considered include Total Value Locked (TVL), active users, protocol fees, revenues, and trading volumes on DEXs.

The Impact of Fundamentals on Valuations: A Matter of Time Horizon

Short Term: The Market Remains Dominated by Sentiment

The analysis highlights that, over short horizons (1 month), the addition of fundamental metrics to models based solely on bitcoin and ethereum does not significantly enhance the ability to explain the growth of market capitalization. Since January 2024, the average contribution of fundamentals over 1 month has even been slightly negative (-0.73 percentage points).

Mid-term: Fundamentals Start to Matter

Over a 3-month horizon, however, the influence of fundamentals increases, with an average improvement of +2.12 percentage points in explaining growth compared to models based solely on the market.

Long-term: Fundamentals Become Key

However, it is over the long term (6 months) that the picture changes radically. From 2024 onwards, models based exclusively on fundamentals outperform “market-only” models by over 8.6 percentage points on average, explaining up to 88% of the growth in DeFi valuations. Between mid-2024 and 2025, this advantage increases on average to +12.05 percentage points.

These results suggest that, although the market is not yet perfectly efficient in reflecting real-time on-chain data, fundamentals are becoming increasingly central to price determination, especially when observing longer periods.

Which Fundamentals Matter the Most?

TVL and Protocol Fees Leading the Way

In the 2024–2025 period, TVL and protocol fees remain the primary drivers of DeFi valuations, with a feature importance of 19.7% and 19.2% respectively in predictive models. Closely following are protocol revenue (15.7%), daily active users (13.9%), daily transactions (12.4%), and trading volumes on DEXs (11.8%).

Social Sentiment: A Marginal Role

The addition of social sentiment metrics (such as the number of followers on crypto Twitter) to market models has led to only marginal improvements and, since 2024, has no longer surpassed the explanatory power of fundamentals. This data confirms that narrative and social popularity are giving way to more robust economic metrics.

Why doesn’t the market price in fundamentals in real-time?

Despite the availability of on-chain data, the DeFi market still shows significant delays in assimilating fundamental information. This can be interpreted either as a sign of inefficiency or as a form of rational caution: short-term variations in fundamentals may be temporary or driven by artificial incentives, so investors prefer to wait for confirmation of persistence before recalibrating valuations.

Moreover, qualitative factors such as strategic positioning, product development speed, and competitive defensibility remain crucial for correctly interpreting quantitative data, especially in the early stages or during strong growth phases of a protocol.

Opportunities for Investors and Founders

This “latency” in incorporating fundamentals offers alpha opportunities for those who can combine quantitative and qualitative analysis. Savvy investors can exploit market delays to position themselves in projects with solid fundamentals before the rest of the market recognizes their value.

For DeFi founders, however, demonstrating sustainable economic value and actively retaining users is becoming increasingly important in a context of growing sophistication and competition.

A Maturing Market, Yet Still Evolving

The trend emerging from Greenfield Capital’s study is clear: DeFi is maturing and valuations are increasingly anchored to fundamentals, especially during flat or bear market periods. However, full informational efficiency has not yet been achieved, and delays and volatility persist, due to both rational reasons and speculative behaviors.

With the increase in institutional participation and the adoption of advanced analytical tools, the market is expected to continue enhancing its ability to “read, write, and reprice” on-chain data more efficiently. Only in this way can DeFi fully realize its potential as an open, decentralized, and transparent financial system.