In 2020, bitcoin (BTC) and Ethereum (ETH) earned 98% of all crypto revenue.

Today, they earn just 8%.

So who’s earning the other 92%? A new generation of crypto businesses. That’s where I expect the biggest winners of this crypto cycle to come from.

• I mapped 1,362 crypto businesses.

I wanted to know exactly where the money was going.

So I built a model of every crypto business I could find that earned a fee over the past year.

For each one, I tracked what its customers pay, what it keeps, how fast it’s growing, what it’s worth, and how much of the money reaches the people who own its token.

That kind of analysis would have been useless a few years ago.

For most of crypto’s history, few crypto businesses had customers paying meaningful amounts of money. The market ran on speculation.

Today, hundreds of crypto businesses have real customers paying real fees. A lot of that money now flows to businesses that didn’t exist five years ago.

One of them is…

• Hyperliquid (HYPE).

Hyperliquid opened for business in early 2023. Yet it already makes more money than Ethereum.

It was built after FTX collapsed, on one simple idea: An exchange you can check beats an exchange you have to trust. Every trade and every dollar on Hyperliquid sits on a public blockchain for anyone to see.

People use it to bet on whether prices will rise or fall. It started with crypto. Now you can also trade stocks, gold, and oil on it around the clock. Every time someone makes a trade, Hyperliquid takes a small cut.

Those little cuts will add up to about $700 million this year.

And here’s the part that matters most. Almost all that money is spent buying HYPE on the open market. That’s roughly $1.9 million worth of HYPE, every single day. It’s as if Nasdaq took every dollar of its trading fees and used it to buy back its own stock.

But the money isn’t the only reason I’m bringing it up. From its October peak to its July 1 low, bitcoin lost more than half its value. Ethereum lost two-thirds.

HYPE went the other way. It rose by about a third.

Over the same stretch, Zcash (ZEC) more than doubled. GEODNET (GEOD) rose about 30%.

We own all three in RiskHedge Venture. And today, all three are hitting new highs. HYPE just hit an all-time high. Zcash hit its highest price since 2016. And GEODNET hit its highest price of the year.

• Bitcoin’s bear market is over.

It bounced about 45% from its July 1 low.

That matters enormously, because bitcoin sets the tone for the entire crypto market. When it rises, money flows back in and investors become more willing to take risk.

That doesn’t mean you should buy every crypto that reports revenue. So I put all 1,362 businesses through a series of tests.

Just 33 were investable.

First, I looked for crypto businesses making at least $10 million a year. That tells me people are using the product and paying for it.

Then I weeded out tiny projects that are hard to buy and sell.

Thirty-three is astonishingly small when you consider how many thousands of cryptos exist.

But it means this shift is still in its early innings.

When an industry matures, the easy edges disappear. Everyone knows the major players. Thousands of analysts pore over the same numbers. Bargains get harder to find.

Crypto isn’t there yet. Most investors still aren’t digging through revenue and token economics the way they would with a stock. That leaves room for people willing to do the homework.

• That’s where we have an edge.

Narrowing the field to 33 was the easy part. Next comes the most important question: Will this business make money for you?

Just because a crypto business makes money doesn’t mean you make money when you own its token.

When you own a stock, you own a slice of the business. When the business earns more, your slice is worth more. Crypto doesn’t always work that way. A crypto business can earn hundreds of millions of dollars while the people holding its token get nothing.

Crypto users pay about $28 billion a year in fees. Only about 10 cents of every dollar reaches the people who own the tokens.

A big reason is regulation. For years, a token that paid its holders risked being treated like an unregistered stock. That’s changing.

In August, the SEC proposed a 400-page rulebook for crypto. As the rules get clearer, I expect more crypto businesses to start paying their token holders. The market isn’t pricing that in yet.

And it’s already rewarding the ones that pay. Since the July 1 bottom, the typical crypto business that pays its token holders is up 87%. The typical one that pays nothing is up 52%.

So I put the 33 through four tests.

Does it send at least half its revenue to token holders? Seventeen passed.

Is its revenue growing? That left eight.

Is it near the most revenue it has ever made? That left three.

And is the price sensible, at under 15X sales? That left one.

One business out of 1,362 passed every test. We own it. Venture subscribers know which one.

• Crypto businesses die young.

Of the 25 biggest crypto businesses a year ago, the typical one has lost half its revenue.

Phantom, the wallet most Solana (SOL) users keep on their phones, is down 68%.

Meanwhile, about a third of crypto’s revenue outside stablecoins now comes from businesses that weren’t earning a dime two years ago.

So a watchlist you build today goes stale fast. What you need is a screen, re-run every month. That’s what I do inside RiskHedge Venture.

Every month, I re-run all 1,362 businesses. Then I tell you what we own, what we’re buying, what we’re selling, and exactly how each one makes money for you.

As this new bull market takes shape, we’ll keep following the money.

Stephen McBride

Chief Analyst, RiskHedge

PS: If you want to go deeper on this topic, Dan Steinhart and I recently sat down for our State of Crypto Address. We talked about why the old crypto playbook is changing, why I’m following the money into real crypto businesses, and how regulatory clarity could finally let more of that value flow back to token holders. Watch the full conversation here.