Morpho’s $170mln interest haul hides bigger question: Can it beat Aave?

Morpho, a decentralized DeFi lending protocol, is making headlines for the right reasons.

As per a recent update, borrowers on Morpho paid a total of “$170M in interest during the past year,” as reported by Token Terminal. Though this might raise eyebrows at first glance, the hidden layers tell a completely different story. 

With a roughly 10% of ‘take rate,’ the Decentralized Autonomous Organization (DAO) would generate about $17 million in annual revenue. This would take place against a $1.7 billion valuation. Calculated together, this means that Morpho is valued at 100x its annual revenue.

In simple terms, compared to its current earnings, investors are valuing Morpho at a much higher price. So, even if the user at Morpho paid a huge sum of $170 million in interest, only $17 million will go to the DAO.

However, it’s important to note that all this is happening in anticipation of a revenue that will skyrocket exponentially. 

Morpho vs Aave investment strategies 

This, in comparison to Aave [AAVE], which recently made news for crossing $10 million in deposits, is shocking.

As per Token Terminal’s data,  Aave has generated $140 million in annual revenue against a $1.5 billion valuation. This means that in comparison to Morpho [MORPHO], Aave is valued at much less than 10-11x its annual revenue. 

So, in a nutshell, Morpho is focused on user yield and user attraction with its lower fees. Whereas Aave has a higher fee-capturing model and is already optimised for revenue, unlike Morohpo, in which monetization happens later.

However, if Morpho plans to increase its monetization in the near term, then it would lose the current competitive edge it has against Aave.

Additionally, Aave has been long here in the game and has also tested the major 2022 FTX crash, whereas Morpho is comparatively new with a riskier protocol. 

In fact, if Morpho fails to grow in valuation, then the current interest paid may look overpriced. But, if things turn out in their favour, then revenue could jump from $17 million to $100 million – making today’s value look peanuts in hindsight.

Price action and on-chain metrics boost optimism but…

Yet, despite this strategic investment that sets up borrowers for future revenue growth, the price of Morpho was concerning. In the past 24 hours, the altcoin had dropped by 1.66% to $1.73.

The weekly charts, however, show a massive jump of over 19%, signalling that this drop might just be a short-term noise reflecting the border market sentiment. 

In fact, by the end of the last week, MORPHO had seen a 10% surge on the 10th of April, with the token’s trading volume rising by 2x to around $58 million.

However, Aave, on the other hand, was changing hands at $89.91 aftera drop of 2.29% in the past 24 hours and over 3% in the past week. 

This was happening at the back of total MORPHO holders, seeing a surge, indicating that there was consistent accumulation happening.

Meanwhile, the RSI was also strong, indicating bullish sentiment along with the social volume spikes, suggesting that they were not just hype driven rallies. All in all, these metrics suggest that the market is gearing up to price in future growth.

Final Summary

• Morpho and Aave both follow different strategies to keep suitable for their business model.
• The price action of MORPHO looks concerning, but metrics paint an optimistic future for the altcoin.