Crypto’s $31K Valuation Questioned: Experts Clash Over Layer 1 Network Effects

• Santos claims network effects inflate L1 blockchain valuations.
• Experts argue value lies in security, liquidity, and modularity.

On November 26, 2025, Cointelegraph reported on Santiago Roel Santos’s claims that Layer 1 blockchains are overvalued due to a misunderstanding of true network effects, prompting sharp industry debate. Santos, CEO of Inversion Capital, argued that these blockchains are priced based on network effects they do not genuinely possess, pointing to congestion and inefficiencies that undermine their perceived value.

Santos detailed his argument in a Substack post, asserting that adverse effects from increased usage—such as higher fees and slower transaction speeds—negatively impact user experience on L1 blockchains. He questioned the application of Metcalfe’s Law, which evaluates networks based on the square of their connected users, as a justification for current L1 valuations. Instead, he suggested that scalability challenges reveal their overvaluation under this framework.

Industry experts contested Santos’s claims, maintaining that L1 blockchains derive their network effects from validators, security, and liquidity, rather than individual user interactions. Jasper De Maere, a strategist at Wintermute, argued that comparing L1 blockchains to consumer platforms like Facebook misrepresents their value. While transactional congestion is observable in L1s, De Maere pointed out that similar inefficiencies are internalized within traditional applications, making direct comparisons misleading.

Tomas Fanta of Heartcore provided additional perspective, emphasizing that high-performance blockchains do not necessarily experience worsening fees due to increased usage. He described how adoption enhances network liquidity and yields, improving overall value rather than diminishing it. Fanta underscored liquidity as a fundamental indicator of network health and strength.

Not all commentators dismissed Santos’s criticism entirely. Ben Harvey, a researcher at Keyrock, agreed that certain L1s might be overvalued but highlighted scalability and artificial intelligence integration as critical differentiators across blockchain protocols. He argued that these elements could generate meaningful distinctions between L1 ecosystems, suggesting that network effects depend substantially on technological innovation.

The debate reflected contrasting viewpoints on how to measure and assess value in the cryptocurrency industry. Santos calculated that the estimated 40–70 million monthly active crypto users are valued between $18,000 to $31,500 each, judging by a $1.26 trillion market cap excluding Bitcoin. He compared this valuation to Meta’s, where users are valued at approximately $516 each. Martin Kupka, formerly of RockawayX, countered, stating that the clearest network effects in crypto are seen within stablecoins and exchanges, where liquidity improves trade efficiency and execution.

De Maere concluded that while traditional metrics may suggest overvaluation of L1 blockchains, the modular architecture of blockchain technology adds layers where value compounds—such as liquidity, security, and applications. He likened the current phase of the cryptocurrency industry to the early evolution of Web2, where valuation frameworks remained in flux, emphasizing the need for more refined models to evaluate blockchain ecosystems.