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SUSHI, SushiSwap’s original token, was up 73% in the past four days. However, some investors believe that the DeFi token has a lot more leeway.

SushiSwap is an automated market maker (AMM) that allows users to trade cryptocurrencies on the Ethereum blockchain in a decentralized manner.

SUSHI / USDT 15-Minute Price Chart (Binance). Source: TradingView.com

Why is SUSHI undervalued at $ 2 billion?

SUSHI’s market cap was $ 2 billion while its price exceeded $ 16. But there are three main reasons it could still be undervalued.

First, Uniswap, its direct competitor, is hovering around its $ 6 billion market cap, despite the narrowing gap in statistics. Second, compared to traditional companies, SushiSwap has an attractive price / sales ratio. Third, the DeFi market is performing strongly overall, with a total value of locked down (TVL) now in excess of $ 30 billion.

Notably, SushiSwap’s TVL is approaching $ 3 billion, currently between Curve Finance and Synthetix as the sixth most popular DeFi platform.

Total value locked in DeFi. Source: Digital Assets data

Meanwhile, a pseudonymous DeFi analyst known as “DCF GOD” compared SushiSwap to traditional companies, such as Shopify.

He said comparing SushiSwap to these companies based on its earnings, SUSHI would be valued at $ 1,530. He explained:

GMV (daily trading volume) is $ 500 million. Revenue (daily cost) is $ 1.2 million. On an annual basis, that’s $ 182 billion GMV and $ 440 million Rev. Sushi strikers get some of that revenue, so a 10% dividend is $ 2 billion ($ 15.30 / sushi). Shopify feels like a good comparison, given that the “GMV” is only $ 150 billion GMV sales volume, which translates to a market cap of $ 190 billion (1.2x). By the same statistic, Sushi should be a $ 200 billion ($ 1530 / sushi) company. “

The analyst emphasized that SushiSwap can be compared to Shopify and Beyond Meat. Although the two companies are in different industries, they both have cash flow, much the same way as SushiSwap.

One of the most attractive aspects of DeFi is that the valuation of key protocols can be measured by cash flow and quantifiable data.

This allows analysts to make a material comparison between conventional companies and DeFi projects. The analyst added:

“All you need to ask yourself is, ‘Does a purse that processes hundreds of billions of dollars provide more value than peas and chemicals that are compressed into no meat?’ Yes it does. “

What’s next?

Analysts think SUSHI is likely to close the valuation gap with Uniswap (UNI) in the near future.

As SUSHI approaches UNI, the price of SUSHI could go up to about $ 40 to $ 60 as Uniswap is valued at about $ 6 billion.

Analysts at intotheblock said SushiSwap has seen increased momentum and is showing signs of strengthening fundamentals. She explained:

“SUSHI cannot be stopped. And just as the token continues to gain momentum, we’ve seen some impressive stats from the @ SushiSwap protocol. Over the past seven days: – $ 2.83 billion in traded volume (> 400mm per day average) – Liquidity provided up 10% – currently $ 2.27 billion. “

If the volume and user activity on SushiSwap continues to grow, chances are SUSHI will move closer to Uniswap’s valuation.