If there is one chart that matters above all others when valuing Sky, it is the stablecoin supply chart. Everything else—revenues, buybacks, staking yields, ecosystem expansion—ultimately rolls up into one outcome: how much stablecoin supply the system can sustain and grow over time.
Stablecoin supply is not just a vanity metric. It is the closest thing in crypto to a “core product KPI,” because it captures demand, trust, distribution, capital efficiency, and market positioning in one number. For Sky, whose economic engine is built around the stablecoin layer, supply is the cleanest and most objective measure of whether the protocol is winning or losing.
That is why the central question for valuation is not whether Sky has good technology, strong governance, or compelling token narratives. The core valuation question is far more concrete:
What growth scenario is most likely for Sky’s stablecoin supply and market share, and how credibly can the protocol execute it?
In 2022, the valuation case for MakerDAO (and now Sky) was extraordinary. The fundamental thesis at the time was simple and powerful: the stablecoin market would grow exponentially, and the category leader would capture a meaningful share of that growth. Back then, DAI had reached approximately $10 billion of supply in a total stablecoin market of roughly $180 billion, implying a market share of about 5.6%.
Four years later, reality looks very different. The stablecoin market has indeed grown aggressively—surpassing $300 billion—but Sky’s stablecoin supply remains below $10 billion. In other words, the market expanded, yet Sky did not participate proportionally. The protocol’s share of the stablecoin sector materially declined over that period. By early 2025, Sky’s supply had fallen to roughly $5 billion, while the total stablecoin market stood near $200 billion, implying only ~2.5% market share. That drawdown in both absolute supply and relative positioning is the central reason why the protocol’s valuation narrative became far more contested.
And yet the supply chart now suggests a potential regime change. From early 2025 to early 2026, Sky’s stablecoin supply has risen from roughly $5 billion to approximately $9.2 billion, while the stablecoin market expanded from ~$200 billion to ~$300 billion. That means Sky captured approximately $4.2 billion of the $100 billion incremental stablecoin market growth—roughly 4.2% of new stablecoin expansion during that period. Market share has improved from ~2.5% to ~3.1%, signaling what may be the first meaningful shift from multi-year contraction to renewed expansion.
This is why the supply chart is the starting point of any serious valuation exercise. It does not merely describe the past; it defines the decision tree for the future. If Sky can stabilize and grow its share of stablecoin supply—particularly in a market that could structurally expand for many years—then the protocol’s valuation can re-rate meaningfully. If it cannot, then no amount of narrative, buybacks, or yield engineering will compensate for the underlying reality that the core product is not compounding.
The rest of this analysis therefore builds on a single premise: Sky’s valuation depends primarily on the probability-weighted scenarios of stablecoin supply growth and market share capture. Everything else is secondary.
The inflection point for Sky is best understood as the culmination of a long transition toward a fundamentally different strategic model. 2025 marks the end of the restructuring phase and the start of a new regime: a system designed to position Sky as the stablecoin ecosystem capable of delivering the most attractive risk-adjusted remuneration in the market.
This matters because, historically, yield has been one of the most powerful catalysts for stablecoin adoption. The stablecoin market is not purely utility-driven; it is reflexive and incentive-sensitive. The clearest examples are well-known: Terra/Luna accelerated adoption through a heavily subsidized ~20% yield, while Ethena experienced a similarly explosive TVL expansion by offering temporarily exceptional yields through aggressive incentives and favorable market conditions. Ethena’s growth was strong enough at times to surpass Sky in stablecoin supply, reinforcing a hard truth: in the modern stablecoin landscape, higher yields can drive adoption faster than product narratives or brand recognition.
The most rational explanation for Sky’s recent supply recovery is therefore straightforward: Sky’s TVL expansion coincided with stablecoin yields moving back into the double digits. This is not an accident. The market has repeatedly demonstrated that, when investors are offered sustainable-looking high yield on a stable asset, capital migrates quickly.
However, the crucial variable is not whether yield can drive growth—it can. The real question is whether those yields are economically sustainable. Terra proved that structurally unbacked yields can be fatal. Ethena has shown that even sophisticated yield designs can become difficult to maintain at scale, especially when market conditions change, basis compresses, or incentives become too expensive relative to organic revenue.
This sustainability constraint is what makes the stablecoin growth battle particularly difficult, because the largest stablecoins in the market—USDT and USDC—do not pay yield to end users at all. Their growth has historically been driven by a different engine: trading utility and distribution dominance. They are used as base assets for spot and derivatives trading and serve as the primary settlement currency across centralized exchanges and large liquidity venues. In many cases, their issuers may share revenue with distribution partners (USDC is a good example), but that yield is not visible to retail holders. The user-facing product remains simple: “the stablecoin you need to trade.”
Sky has participated in that trading-based growth engine in the past—DAI was once a major settlement asset and swap counterparty. But today, the protocol does not appear to be pursuing the same distribution-first strategy at scale. In fact, one of the most revealing indicators of Sky’s current positioning is that the SKY token itself often has deeper liquidity against other stablecoins than against its own stablecoin system. That detail may seem technical, but it reflects a strategic reality: Sky is not currently winning the stablecoin distribution war on CEXs and trading venues in the same way legacy stablecoins do.
This is where Sky’s new model becomes strategically meaningful. If Sky is not going to win primarily through exchange settlement dominance, then it must win through a different wedge. And today, the most defensible wedge it appears to have is this:
Sky may be the only large-scale stablecoin ecosystem with a credible path to delivering persistent “extra yield” (alpha-like stablecoin returns) in a way that is structurally integrated into the protocol.
This is precisely the role that the new Stars architecture is designed to play. The Stars model is not merely a branding exercise—it is a system designed to industrialize the search for sustainable extrayield by allocating capital into structured strategies and yield-generating primitives. That is why the ecosystem is heavily focused on projects such as Spark, Grove, Keel, and other components of the emerging architecture. They are not ancillary products; they are intended to serve as the primary emission engines of stablecoin supply growth by providing yields that can remain competitive without relying entirely on inflationary subsidies.
Of course, this strategy introduces new risks. Yield does not appear from nowhere: it must be generated through exposure to risk premiums, structured strategies, counterparty dynamics, or duration and credit-like risks. Pursuing extrayield at scale inevitably increases complexity and introduces new points of failure. But the alternative is equally clear: without a compelling yield edge—or without a compelling distribution edge—stablecoin market share does not compound. That is what the 2022–2024 period demonstrated, when Sky’s supply stagnated while the stablecoin market expanded materially.
This is why the restructuring period has been so punishing for valuation. The protocol has historically been profitable and has invested heavily in its roadmap, yet it delivered no meaningful stablecoin supply growth for several years. In public markets, that combination—profitability plus investment, but no growth—typically results in valuation compression. Sky’s token price has been penalized not because the protocol lacks revenue, but because the market began to question its ability to translate investment into stablecoin market share expansion.
If 2025 truly represents the transition into a sustainable growth regime—where the Stars architecture can deliver durable extrayield and drive stablecoin expansion—then 2026 may become the first year in which that growth re-prices the asset. Sky is already highly profitable. What has been missing is not cash generation, but credible compounding in the core KPI: stablecoin supply. The recent reversal from ~$5B to ~$9B suggests the inertia may be shifting. And if that shift holds, the valuation framework must change with it.
An additional factor supporting Sky’s recent supply recovery is capital migration from Ethena following periods of liquidation stress and a concurrent decline in Ethena’s effective user-facing yields.
During episodes of market volatility, Ethena’s design has demonstrated sensitivity to funding conditions, basis compression, and liquidation dynamics, which can temporarily impair both perceived safety and headline returns. As yields compressed and risk perceptions increased, part of the capital that had previously been attracted by Ethena’s exceptional remuneration appears to have rotated into alternative stablecoin systems offering a more conservative risk profile.
Sky has likely been a natural beneficiary of this rotation. As a protocol with a longer operational history, deeper governance infrastructure, and a reputation for risk conservatism, Sky represents a credible “flight-to-quality” destination when aggressive yield strategies become less attractive. This dynamic reinforces the broader thesis: stablecoin supply is highly sensitive not only to absolute yield levels, but also to relative changes in risk-adjusted returns across competing ecosystems.
To understand the growth logic of Sky’s new architecture, it is useful to view the ecosystem through a macro-financial lens. Sky is not simply issuing a stablecoin and distributing yield. It is increasingly behaving like a central bank and credit allocator within an emerging onchain financial system.
At the center of the model is what can be described as a base policy rate—a minimum yield level that the ecosystem aims to deliver to stablecoin holders. That policy rate is not free. It must be funded through productive deployment of stablecoin liabilities into strategies and credit channels capable of generating returns above the base rate. In that sense, Sky resembles a central bank that establishes an official rate and then extends credit to a network of entities—internal strategies, external borrowers, and structured financial primitives—that must earn higher rates in order to (1) pay the official yield, and (2) generate net revenue for the protocol through the margin.
This framing is critical because it clarifies the true strategic challenge: the “Stars” architecture is fundamentally a system designed to arbitrage Sky’s base rate. Each Star is not merely a product. It is a credit deployment engine: a vehicle whose purpose is to discover, scale, and industrialize yield opportunities that can support the base rate while preserving solvency and generating surplus.
However, sustaining this model is structurally difficult. Unlike early DeFi cycles where yield could be “manufactured” through inflation, Sky’s current approach is increasingly constrained by the reality of competitive return markets. Finding attractive yield purely inside crypto is not trivial.
Historically, one of the dominant yield sources inside crypto has been leverage demand—funding traders, basis trades, and structural borrowing needs. But this channel is highly cyclical and increasingly competitive. Leverage-driven yield compresses dramatically when volatility declines, when leverage appetite fades, or when market structure becomes more efficient. It also introduces pro-cyclicality: when markets turn down, leverage demand collapses at the same time as risk rises, creating precisely the environment where stablecoin ecosystems become fragile.
Outside of crypto, the most obvious yield source is exposure to traditional fixed income—Treasury bills, investment-grade credit, or structured corporate bond portfolios. But this is where competition becomes intense. The “real yield” trade has attracted extraordinary capital, and competition in tokenized fixed income is increasingly pointing toward one of the most efficient activities in traditional finance: credit intermediation at scale.
This implies a paradox: the more tokenization becomes mainstream, the more the onchain credit market may begin to resemble traditional finance in its efficiency and compressed spreads. In that regime, the remaining opportunities may concentrate in the margins—where either (a) traditional finance is not willing to lend due to regulatory constraints or risk preferences, or (b) where onchain infrastructure provides unique advantages that allow it to originate demand that banks cannot service efficiently.
One of the key risks in this transition is the classic problem of adverse selection. If onchain credit markets compete directly with banks on high-quality borrowers, spreads may compress to the point where the risk-adjusted return no longer funds Sky’s base rate plus a margin. The residual opportunities may then become dominated by borrowers that banks do not want to finance—either because of higher default risk, weaker collateral structures, jurisdictional exposure, or informational opacity.
If that dynamic dominates, yield generation may become increasingly dependent on taking credit risk that is structurally inferior to what the banking system avoids. That would create a fragile growth model: supply expands, but solvency risk rises silently.
Yet there is also a powerful countervailing force. Onchain credit markets can offer structural advantages that traditional finance cannot easily replicate:
Lower structural cost base
Onchain systems can operate with dramatically lower overhead than banks, particularly in distribution, servicing, and settlement.
Access to global demand
Perhaps the most underappreciated advantage is the ability to serve jurisdictions that do not have deep, functional financial systems. Traditional banking systems struggle to profitably reach many parts of the world where credit demand is real but infrastructure is weak.
Speed and flexibility
Onchain credit markets can structure and deploy capital faster, with more flexible collateral frameworks, and potentially more granular risk segmentation.
These structural advantages may generate new credit demand rather than merely competing for existing borrowers. In other words, onchain credit could become not just a substitute for bank lending, but an additional layer of financial inclusion and capital formation — especially if collateralization, transparency, and enforcement mechanisms evolve.
Beyond traditional borrowers, the fastest-growing opportunity may be credit demand from the new generation of onchain-native technology companies and protocols. The emergence of onchain businesses, infrastructure providers, and tokenized real-world networks may create structurally new credit needs: working capital, treasury management, strategic financing, and collateralized borrowing within transparent frameworks.
If this segment grows, Sky becomes positioned not merely as a stablecoin issuer, but as a fundamental credit layer of a new financial system.
This brings us to the most important strategic conclusion of the central-bank framing:
If Sky is attempting to become a scalable global credit allocator, then risk management becomes the core competitive advantage.
In traditional finance, the most powerful institutions are not those with the highest yield—they are those with the best risk-adjusted underwriting, the deepest liquidity discipline, and the strongest survival capabilities across cycles. If Sky can build an institutional-grade risk engine—one capable of scaling yield strategies and credit deployment without repeating the fragility of prior stablecoin experiments—then the protocol may be able to compound supply growth while preserving trust.
And that is ultimately the key constraint. Sky’s stablecoin can only grow if its liabilities remain credible across regimes. Yield can drive growth, but trust is what sustains it. The future of Sky, therefore, is not only about finding yield. It is about building an architecture that can repeatedly generate yield without compromising solvency, credibility, or long-term governance integrity.
In that sense, Sky’s 2025 inflection point may represent more than a recovery in TVL. It may represent the transition into a fundamentally different strategic posture: from a stablecoin protocol competing for DeFi relevance to a financial system attempting to compete for a meaningful share of the global credit market — where scale is large, competition is real, and risk management determines survival.
Sky’s new strategy implicitly depends on one central claim: that the ecosystem can offer a stablecoin yield that is structurally attractive relative to competitors, while remaining solvent and credible through market cycles. This is not merely a marketing proposition—it is a financial constraint. In the “central bank” framing, Sky sets an internal policy rate and then must repeatedly find and scale investment and credit channels whose returns exceed that rate plus a safety margin.
The difficulty is that stablecoin yield is not a natural free lunch. Every basis point of sustainable yield must come from one of three sources: (1) risk premia, (2) market inefficiencies, or (3) deliberate redistribution mechanisms. The long-term viability of Sky’s policy rate therefore depends on the degree to which those sources remain available at scale, and on whether the protocol can manage the risk embedded in each.
To model sustainability, yields must be decomposed into three categories:
(A) Structural yield
Return generated by durable sources that can persist through cycles. Examples include:
short-duration government bills or high-quality credit instruments (if accessible at scale)
long-term risk premia in lending markets supported by robust underwriting
stable demand for credit from onchain-native businesses that is not purely speculative
Structural yield is the most valuable because it produces the closest equivalent to “cashflow,” and because it can be capitalized in valuation models similarly to a real-world financial franchise.
(B) Cyclical yield
Return generated primarily during favorable market regimes:
leverage demand, basis trades, funding rate capture
volatility-driven spreads and trader demand
speculative demand for credit during bull cycles
Cyclical yield is not useless—it can be extremely profitable—but it is unstable. If Sky’s stablecoin expansion is mainly driven by cyclical yield, then stablecoin supply becomes correlated with bull-market conditions and may contract meaningfully when returns compress.
(C) Transfer-based yield
Return that is economically funded by other token holders, redistribution mechanics, or incentives rather than external cashflow:
reward systems that rely on inflows, dilution effects, or differential participation
“money transfer” models where non-participants subsidize participants
Transfer yield can be powerful as game theory, but it is the least sustainable in valuation terms unless paired with strong structural revenue. If yields are fundamentally transfer-based, then growth depends on continuous demand for participation and/or a persistent pool of non-participating holders who accept economic dilution.
The core institutional question becomes:
Are Sky’s rewards funded primarily by real protocol revenue and externally generated yield, or are they funded by redistribution and subsidization?
A practical way to quantify this is with a simple framework:
Reward Coverage Ratio = (Protocol revenues + Net investment returns) / Rewards paid
If the ratio is consistently above 1, the system is self-funded and compounding.
If it is consistently below 1, the system relies on non-sustainable mechanisms (incentives, dilution, or temporary regime conditions).
This ratio should be tested over multiple market regimes. It is not enough to observe it during a bull cycle; it must hold during periods of low volatility, compressed basis, or stress in credit markets.
A central risk in the policy-rate model is that it can become politically and economically difficult to lower yields once the market has anchored on them. In traditional systems, central banks have credibility tools. In crypto, credibility is largely market-driven. If Sky sets yields too high relative to sustainable sources of return, it risks:
compressing its own margin,
taking more credit or market risk to defend the rate,
or triggering outflows if yields drop, creating supply instability.
This is the central bank trap: the rate becomes the product, and maintaining it becomes the strategy—even when conditions deteriorate.
The pursuit of extrayield is strategically rational, but the risk frontier becomes non-linear: small increases in target yield can require disproportionately large increases in complexity and risk exposure. That is why the Stars architecture is both the growth engine and the primary risk vector.
At scale, the relevant question is not “Can Sky generate yield?” It is:
Can Sky generate yield with disciplined underwriting and resilience, at a scale large enough to support stablecoin supply growth without compromising solvency?
This is where risk management becomes valuation-critical. Strong growth with fragile yield is not a bullish story—it is a delayed crisis.
Sky’s valuation ultimately depends on two measurable variables: (1) the ability to compound stablecoin supply and regain market share, and (2) the sustainability of protocol profits that can be credibly directed toward token holders. The Annual State of the Sky Ecosystem provides enough evidence to justify a meaningful re-rating versus the valuation regime that dominated the 2022–2024 contraction period.
First, Sky has entered what appears to be a clear inflection point. USDS supply has recovered from roughly ~$5B at the beginning of 2025 to approximately ~$9–10B by late 2025, while the stablecoin market expanded materially. This implies not only absolute growth, but also a return to positive market share dynamics — a critical shift after years of stagnation.
Second, the protocol is now a real cashflow business. The report indicates an annualized gross protocol revenue of ~$435M, net protocol revenue of ~$212M, and annualized protocol profits of roughly ~$168M. These are not speculative metrics; they represent a stable, monetizable economic engine.
Importantly, the system is explicitly designed so that approximately 75–100% of profits are allocated to token holders through systematic buybacks redistributed as staking yield, creating a clearer value-accrual framework than most DeFi protocols.
From a valuation perspective, a fair way to price Sky is to capitalize sustainable profits using a risk-adjusted multiple. For a high-margin DeFi cashflow asset with governance and regulatory risk, a 12–18x multiple on sustainable profits is a reasonable institutional range. Applying that multiple to ~$168M of annualized profits results in an equity value range of approximately $2.0B–$3.0B.
However, the supply growth inflection and the structural shift toward operating leverage justify a higher re-rating scenario in which profits expand toward ~$200M–$230M and the market assigns a 15–20x multiple, producing a valuation in the $3.5B–$5.0B range.
Using the SKY supply cap of 23.46B tokens, a $3.5B–$5.0B valuation translates into a token price range of roughly $0.15–$0.20 per SKY, which we view as a defensible fair-value band under a base-to-bull scenario where stablecoin supply continues to grow and profit allocation remains credible.
This range also implicitly reflects the key risks that justify a discount: the small capital buffer (~$32M), execution risk in scaling the Stars architecture, and the governance-dependent nature of tokenholder claims.
But if the current supply growth trajectory continues into 2026 and Sky’s operational leverage materializes, these risks may be progressively discounted, enabling a re-rating toward the upper end of the band.
Terminal FCF (2028): $1,045.8M
TV = FCF × (1+g) / (r−g) = 1,045.8 × 1.03 / (0.20−0.03)
Terminal Value (2028): $6,336.0M
PV(Terminal Value): $3,666.7M
PV(Explicit FCF 2026–2028): $1,416.1M
PV(Terminal Value): $3,666.7M
Capital reserves: $32.0M
Equity Value: $5,114.8M
Implied SKY price (23.46B tokens): ≈ $0.218 per SKY
Under a high-growth scenario where USDS supply reaches ~$50B by 2028, and assuming net revenue margins stabilize around ~2.3–2.35% with modest operational leverage, a discounted cash flow approach (20% discount rate, 3% terminal growth) implies an equity value of approximately ~$5.1B. Using the SKY supply cap of 23.46B tokens, this corresponds to an implied value of roughly $0.22 per SKY, supporting a fair-value band of $0.15–$0.20+ depending on execution and margin durability.
If there is one chart that matters above all others when valuing Sky, it is the stablecoin supply chart. Everything else—revenues, buybacks, staking yields, ecosystem expansion—ultimately rolls up into one outcome: how much stablecoin supply the system can sustain and grow over time.
Stablecoin supply is not just a vanity metric. It is the closest thing in crypto to a “core product KPI,” because it captures demand, trust, distribution, capital efficiency, and market positioning in one number. For Sky, whose economic engine is built around the stablecoin layer, supply is the cleanest and most objective measure of whether the protocol is winning or losing.
That is why the central question for valuation is not whether Sky has good technology, strong governance, or compelling token narratives. The core valuation question is far more concrete:
What growth scenario is most likely for Sky’s stablecoin supply and market share, and how credibly can the protocol execute it?
In 2022, the valuation case for MakerDAO (and now Sky) was extraordinary. The fundamental thesis at the time was simple and powerful: the stablecoin market would grow exponentially, and the category leader would capture a meaningful share of that growth. Back then, DAI had reached approximately $10 billion of supply in a total stablecoin market of roughly $180 billion, implying a market share of about 5.6%.
Four years later, reality looks very different. The stablecoin market has indeed grown aggressively—surpassing $300 billion—but Sky’s stablecoin supply remains below $10 billion. In other words, the market expanded, yet Sky did not participate proportionally. The protocol’s share of the stablecoin sector materially declined over that period. By early 2025, Sky’s supply had fallen to roughly $5 billion, while the total stablecoin market stood near $200 billion, implying only ~2.5% market share. That drawdown in both absolute supply and relative positioning is the central reason why the protocol’s valuation narrative became far more contested.
And yet the supply chart now suggests a potential regime change. From early 2025 to early 2026, Sky’s stablecoin supply has risen from roughly $5 billion to approximately $9.2 billion, while the stablecoin market expanded from ~$200 billion to ~$300 billion. That means Sky captured approximately $4.2 billion of the $100 billion incremental stablecoin market growth—roughly 4.2% of new stablecoin expansion during that period. Market share has improved from ~2.5% to ~3.1%, signaling what may be the first meaningful shift from multi-year contraction to renewed expansion.
This is why the supply chart is the starting point of any serious valuation exercise. It does not merely describe the past; it defines the decision tree for the future. If Sky can stabilize and grow its share of stablecoin supply—particularly in a market that could structurally expand for many years—then the protocol’s valuation can re-rate meaningfully. If it cannot, then no amount of narrative, buybacks, or yield engineering will compensate for the underlying reality that the core product is not compounding.
The rest of this analysis therefore builds on a single premise: Sky’s valuation depends primarily on the probability-weighted scenarios of stablecoin supply growth and market share capture. Everything else is secondary.
The inflection point for Sky is best understood as the culmination of a long transition toward a fundamentally different strategic model. 2025 marks the end of the restructuring phase and the start of a new regime: a system designed to position Sky as the stablecoin ecosystem capable of delivering the most attractive risk-adjusted remuneration in the market.
This matters because, historically, yield has been one of the most powerful catalysts for stablecoin adoption. The stablecoin market is not purely utility-driven; it is reflexive and incentive-sensitive. The clearest examples are well-known: Terra/Luna accelerated adoption through a heavily subsidized ~20% yield, while Ethena experienced a similarly explosive TVL expansion by offering temporarily exceptional yields through aggressive incentives and favorable market conditions. Ethena’s growth was strong enough at times to surpass Sky in stablecoin supply, reinforcing a hard truth: in the modern stablecoin landscape, higher yields can drive adoption faster than product narratives or brand recognition.
The most rational explanation for Sky’s recent supply recovery is therefore straightforward: Sky’s TVL expansion coincided with stablecoin yields moving back into the double digits. This is not an accident. The market has repeatedly demonstrated that, when investors are offered sustainable-looking high yield on a stable asset, capital migrates quickly.
However, the crucial variable is not whether yield can drive growth—it can. The real question is whether those yields are economically sustainable. Terra proved that structurally unbacked yields can be fatal. Ethena has shown that even sophisticated yield designs can become difficult to maintain at scale, especially when market conditions change, basis compresses, or incentives become too expensive relative to organic revenue.
This sustainability constraint is what makes the stablecoin growth battle particularly difficult, because the largest stablecoins in the market—USDT and USDC—do not pay yield to end users at all. Their growth has historically been driven by a different engine: trading utility and distribution dominance. They are used as base assets for spot and derivatives trading and serve as the primary settlement currency across centralized exchanges and large liquidity venues. In many cases, their issuers may share revenue with distribution partners (USDC is a good example), but that yield is not visible to retail holders. The user-facing product remains simple: “the stablecoin you need to trade.”
Sky has participated in that trading-based growth engine in the past—DAI was once a major settlement asset and swap counterparty. But today, the protocol does not appear to be pursuing the same distribution-first strategy at scale. In fact, one of the most revealing indicators of Sky’s current positioning is that the SKY token itself often has deeper liquidity against other stablecoins than against its own stablecoin system. That detail may seem technical, but it reflects a strategic reality: Sky is not currently winning the stablecoin distribution war on CEXs and trading venues in the same way legacy stablecoins do.
This is where Sky’s new model becomes strategically meaningful. If Sky is not going to win primarily through exchange settlement dominance, then it must win through a different wedge. And today, the most defensible wedge it appears to have is this:
Sky may be the only large-scale stablecoin ecosystem with a credible path to delivering persistent “extra yield” (alpha-like stablecoin returns) in a way that is structurally integrated into the protocol.
This is precisely the role that the new Stars architecture is designed to play. The Stars model is not merely a branding exercise—it is a system designed to industrialize the search for sustainable extrayield by allocating capital into structured strategies and yield-generating primitives. That is why the ecosystem is heavily focused on projects such as Spark, Grove, Keel, and other components of the emerging architecture. They are not ancillary products; they are intended to serve as the primary emission engines of stablecoin supply growth by providing yields that can remain competitive without relying entirely on inflationary subsidies.
Of course, this strategy introduces new risks. Yield does not appear from nowhere: it must be generated through exposure to risk premiums, structured strategies, counterparty dynamics, or duration and credit-like risks. Pursuing extrayield at scale inevitably increases complexity and introduces new points of failure. But the alternative is equally clear: without a compelling yield edge—or without a compelling distribution edge—stablecoin market share does not compound. That is what the 2022–2024 period demonstrated, when Sky’s supply stagnated while the stablecoin market expanded materially.
This is why the restructuring period has been so punishing for valuation. The protocol has historically been profitable and has invested heavily in its roadmap, yet it delivered no meaningful stablecoin supply growth for several years. In public markets, that combination—profitability plus investment, but no growth—typically results in valuation compression. Sky’s token price has been penalized not because the protocol lacks revenue, but because the market began to question its ability to translate investment into stablecoin market share expansion.
If 2025 truly represents the transition into a sustainable growth regime—where the Stars architecture can deliver durable extrayield and drive stablecoin expansion—then 2026 may become the first year in which that growth re-prices the asset. Sky is already highly profitable. What has been missing is not cash generation, but credible compounding in the core KPI: stablecoin supply. The recent reversal from ~$5B to ~$9B suggests the inertia may be shifting. And if that shift holds, the valuation framework must change with it.
An additional factor supporting Sky’s recent supply recovery is capital migration from Ethena following periods of liquidation stress and a concurrent decline in Ethena’s effective user-facing yields.
During episodes of market volatility, Ethena’s design has demonstrated sensitivity to funding conditions, basis compression, and liquidation dynamics, which can temporarily impair both perceived safety and headline returns. As yields compressed and risk perceptions increased, part of the capital that had previously been attracted by Ethena’s exceptional remuneration appears to have rotated into alternative stablecoin systems offering a more conservative risk profile.
Sky has likely been a natural beneficiary of this rotation. As a protocol with a longer operational history, deeper governance infrastructure, and a reputation for risk conservatism, Sky represents a credible “flight-to-quality” destination when aggressive yield strategies become less attractive. This dynamic reinforces the broader thesis: stablecoin supply is highly sensitive not only to absolute yield levels, but also to relative changes in risk-adjusted returns across competing ecosystems.
To understand the growth logic of Sky’s new architecture, it is useful to view the ecosystem through a macro-financial lens. Sky is not simply issuing a stablecoin and distributing yield. It is increasingly behaving like a central bank and credit allocator within an emerging onchain financial system.
At the center of the model is what can be described as a base policy rate—a minimum yield level that the ecosystem aims to deliver to stablecoin holders. That policy rate is not free. It must be funded through productive deployment of stablecoin liabilities into strategies and credit channels capable of generating returns above the base rate. In that sense, Sky resembles a central bank that establishes an official rate and then extends credit to a network of entities—internal strategies, external borrowers, and structured financial primitives—that must earn higher rates in order to (1) pay the official yield, and (2) generate net revenue for the protocol through the margin.
This framing is critical because it clarifies the true strategic challenge: the “Stars” architecture is fundamentally a system designed to arbitrage Sky’s base rate. Each Star is not merely a product. It is a credit deployment engine: a vehicle whose purpose is to discover, scale, and industrialize yield opportunities that can support the base rate while preserving solvency and generating surplus.
However, sustaining this model is structurally difficult. Unlike early DeFi cycles where yield could be “manufactured” through inflation, Sky’s current approach is increasingly constrained by the reality of competitive return markets. Finding attractive yield purely inside crypto is not trivial.
Historically, one of the dominant yield sources inside crypto has been leverage demand—funding traders, basis trades, and structural borrowing needs. But this channel is highly cyclical and increasingly competitive. Leverage-driven yield compresses dramatically when volatility declines, when leverage appetite fades, or when market structure becomes more efficient. It also introduces pro-cyclicality: when markets turn down, leverage demand collapses at the same time as risk rises, creating precisely the environment where stablecoin ecosystems become fragile.
Outside of crypto, the most obvious yield source is exposure to traditional fixed income—Treasury bills, investment-grade credit, or structured corporate bond portfolios. But this is where competition becomes intense. The “real yield” trade has attracted extraordinary capital, and competition in tokenized fixed income is increasingly pointing toward one of the most efficient activities in traditional finance: credit intermediation at scale.
This implies a paradox: the more tokenization becomes mainstream, the more the onchain credit market may begin to resemble traditional finance in its efficiency and compressed spreads. In that regime, the remaining opportunities may concentrate in the margins—where either (a) traditional finance is not willing to lend due to regulatory constraints or risk preferences, or (b) where onchain infrastructure provides unique advantages that allow it to originate demand that banks cannot service efficiently.
One of the key risks in this transition is the classic problem of adverse selection. If onchain credit markets compete directly with banks on high-quality borrowers, spreads may compress to the point where the risk-adjusted return no longer funds Sky’s base rate plus a margin. The residual opportunities may then become dominated by borrowers that banks do not want to finance—either because of higher default risk, weaker collateral structures, jurisdictional exposure, or informational opacity.
If that dynamic dominates, yield generation may become increasingly dependent on taking credit risk that is structurally inferior to what the banking system avoids. That would create a fragile growth model: supply expands, but solvency risk rises silently.
Yet there is also a powerful countervailing force. Onchain credit markets can offer structural advantages that traditional finance cannot easily replicate:
Lower structural cost base
Onchain systems can operate with dramatically lower overhead than banks, particularly in distribution, servicing, and settlement.
Access to global demand
Perhaps the most underappreciated advantage is the ability to serve jurisdictions that do not have deep, functional financial systems. Traditional banking systems struggle to profitably reach many parts of the world where credit demand is real but infrastructure is weak.
Speed and flexibility
Onchain credit markets can structure and deploy capital faster, with more flexible collateral frameworks, and potentially more granular risk segmentation.
These structural advantages may generate new credit demand rather than merely competing for existing borrowers. In other words, onchain credit could become not just a substitute for bank lending, but an additional layer of financial inclusion and capital formation — especially if collateralization, transparency, and enforcement mechanisms evolve.
Beyond traditional borrowers, the fastest-growing opportunity may be credit demand from the new generation of onchain-native technology companies and protocols. The emergence of onchain businesses, infrastructure providers, and tokenized real-world networks may create structurally new credit needs: working capital, treasury management, strategic financing, and collateralized borrowing within transparent frameworks.
If this segment grows, Sky becomes positioned not merely as a stablecoin issuer, but as a fundamental credit layer of a new financial system.
This brings us to the most important strategic conclusion of the central-bank framing:
If Sky is attempting to become a scalable global credit allocator, then risk management becomes the core competitive advantage.
In traditional finance, the most powerful institutions are not those with the highest yield—they are those with the best risk-adjusted underwriting, the deepest liquidity discipline, and the strongest survival capabilities across cycles. If Sky can build an institutional-grade risk engine—one capable of scaling yield strategies and credit deployment without repeating the fragility of prior stablecoin experiments—then the protocol may be able to compound supply growth while preserving trust.
And that is ultimately the key constraint. Sky’s stablecoin can only grow if its liabilities remain credible across regimes. Yield can drive growth, but trust is what sustains it. The future of Sky, therefore, is not only about finding yield. It is about building an architecture that can repeatedly generate yield without compromising solvency, credibility, or long-term governance integrity.
In that sense, Sky’s 2025 inflection point may represent more than a recovery in TVL. It may represent the transition into a fundamentally different strategic posture: from a stablecoin protocol competing for DeFi relevance to a financial system attempting to compete for a meaningful share of the global credit market — where scale is large, competition is real, and risk management determines survival.
Sky’s new strategy implicitly depends on one central claim: that the ecosystem can offer a stablecoin yield that is structurally attractive relative to competitors, while remaining solvent and credible through market cycles. This is not merely a marketing proposition—it is a financial constraint. In the “central bank” framing, Sky sets an internal policy rate and then must repeatedly find and scale investment and credit channels whose returns exceed that rate plus a safety margin.
The difficulty is that stablecoin yield is not a natural free lunch. Every basis point of sustainable yield must come from one of three sources: (1) risk premia, (2) market inefficiencies, or (3) deliberate redistribution mechanisms. The long-term viability of Sky’s policy rate therefore depends on the degree to which those sources remain available at scale, and on whether the protocol can manage the risk embedded in each.
To model sustainability, yields must be decomposed into three categories:
(A) Structural yield
Return generated by durable sources that can persist through cycles. Examples include:
short-duration government bills or high-quality credit instruments (if accessible at scale)
long-term risk premia in lending markets supported by robust underwriting
stable demand for credit from onchain-native businesses that is not purely speculative
Structural yield is the most valuable because it produces the closest equivalent to “cashflow,” and because it can be capitalized in valuation models similarly to a real-world financial franchise.
(B) Cyclical yield
Return generated primarily during favorable market regimes:
leverage demand, basis trades, funding rate capture
volatility-driven spreads and trader demand
speculative demand for credit during bull cycles
Cyclical yield is not useless—it can be extremely profitable—but it is unstable. If Sky’s stablecoin expansion is mainly driven by cyclical yield, then stablecoin supply becomes correlated with bull-market conditions and may contract meaningfully when returns compress.
(C) Transfer-based yield
Return that is economically funded by other token holders, redistribution mechanics, or incentives rather than external cashflow:
reward systems that rely on inflows, dilution effects, or differential participation
“money transfer” models where non-participants subsidize participants
Transfer yield can be powerful as game theory, but it is the least sustainable in valuation terms unless paired with strong structural revenue. If yields are fundamentally transfer-based, then growth depends on continuous demand for participation and/or a persistent pool of non-participating holders who accept economic dilution.
The core institutional question becomes:
Are Sky’s rewards funded primarily by real protocol revenue and externally generated yield, or are they funded by redistribution and subsidization?
A practical way to quantify this is with a simple framework:
Reward Coverage Ratio = (Protocol revenues + Net investment returns) / Rewards paid
If the ratio is consistently above 1, the system is self-funded and compounding.
If it is consistently below 1, the system relies on non-sustainable mechanisms (incentives, dilution, or temporary regime conditions).
This ratio should be tested over multiple market regimes. It is not enough to observe it during a bull cycle; it must hold during periods of low volatility, compressed basis, or stress in credit markets.
A central risk in the policy-rate model is that it can become politically and economically difficult to lower yields once the market has anchored on them. In traditional systems, central banks have credibility tools. In crypto, credibility is largely market-driven. If Sky sets yields too high relative to sustainable sources of return, it risks:
compressing its own margin,
taking more credit or market risk to defend the rate,
or triggering outflows if yields drop, creating supply instability.
This is the central bank trap: the rate becomes the product, and maintaining it becomes the strategy—even when conditions deteriorate.
The pursuit of extrayield is strategically rational, but the risk frontier becomes non-linear: small increases in target yield can require disproportionately large increases in complexity and risk exposure. That is why the Stars architecture is both the growth engine and the primary risk vector.
At scale, the relevant question is not “Can Sky generate yield?” It is:
Can Sky generate yield with disciplined underwriting and resilience, at a scale large enough to support stablecoin supply growth without compromising solvency?
This is where risk management becomes valuation-critical. Strong growth with fragile yield is not a bullish story—it is a delayed crisis.
Sky’s valuation ultimately depends on two measurable variables: (1) the ability to compound stablecoin supply and regain market share, and (2) the sustainability of protocol profits that can be credibly directed toward token holders. The Annual State of the Sky Ecosystem provides enough evidence to justify a meaningful re-rating versus the valuation regime that dominated the 2022–2024 contraction period.
First, Sky has entered what appears to be a clear inflection point. USDS supply has recovered from roughly ~$5B at the beginning of 2025 to approximately ~$9–10B by late 2025, while the stablecoin market expanded materially. This implies not only absolute growth, but also a return to positive market share dynamics — a critical shift after years of stagnation.
Second, the protocol is now a real cashflow business. The report indicates an annualized gross protocol revenue of ~$435M, net protocol revenue of ~$212M, and annualized protocol profits of roughly ~$168M. These are not speculative metrics; they represent a stable, monetizable economic engine.
Importantly, the system is explicitly designed so that approximately 75–100% of profits are allocated to token holders through systematic buybacks redistributed as staking yield, creating a clearer value-accrual framework than most DeFi protocols.
From a valuation perspective, a fair way to price Sky is to capitalize sustainable profits using a risk-adjusted multiple. For a high-margin DeFi cashflow asset with governance and regulatory risk, a 12–18x multiple on sustainable profits is a reasonable institutional range. Applying that multiple to ~$168M of annualized profits results in an equity value range of approximately $2.0B–$3.0B.
However, the supply growth inflection and the structural shift toward operating leverage justify a higher re-rating scenario in which profits expand toward ~$200M–$230M and the market assigns a 15–20x multiple, producing a valuation in the $3.5B–$5.0B range.
Using the SKY supply cap of 23.46B tokens, a $3.5B–$5.0B valuation translates into a token price range of roughly $0.15–$0.20 per SKY, which we view as a defensible fair-value band under a base-to-bull scenario where stablecoin supply continues to grow and profit allocation remains credible.
This range also implicitly reflects the key risks that justify a discount: the small capital buffer (~$32M), execution risk in scaling the Stars architecture, and the governance-dependent nature of tokenholder claims.
But if the current supply growth trajectory continues into 2026 and Sky’s operational leverage materializes, these risks may be progressively discounted, enabling a re-rating toward the upper end of the band.
Terminal FCF (2028): $1,045.8M
TV = FCF × (1+g) / (r−g) = 1,045.8 × 1.03 / (0.20−0.03)
Terminal Value (2028): $6,336.0M
PV(Terminal Value): $3,666.7M
PV(Explicit FCF 2026–2028): $1,416.1M
PV(Terminal Value): $3,666.7M
Capital reserves: $32.0M
Equity Value: $5,114.8M
Implied SKY price (23.46B tokens): ≈ $0.218 per SKY
Under a high-growth scenario where USDS supply reaches ~$50B by 2028, and assuming net revenue margins stabilize around ~2.3–2.35% with modest operational leverage, a discounted cash flow approach (20% discount rate, 3% terminal growth) implies an equity value of approximately ~$5.1B. Using the SKY supply cap of 23.46B tokens, this corresponds to an implied value of roughly $0.22 per SKY, supporting a fair-value band of $0.15–$0.20+ depending on execution and margin durability.
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Jesus Perez Crypto Plaza / DragonStake
Jesus Perez Crypto Plaza / DragonStake
Hi
Sky’s stablecoin supply is the core KPI for valuation, tying demand, trust, and market share to growth. The 2025 shift to the Stars architecture aims for durable extrayield, portraying Sky as an on-chain central bank and credit allocator where risk management sustains expansion. @especulacion