Key Points

• TVL Surge: Euler Protocol rebounded from a 2023 hack to $1.18B TVL, driven by modular lending and curator-led markets.

• Structural Edge: Offers 1-2% higher yields than Aave and up to 20% higher LTVs, potentially sustaining TVL growth.

• Growth Potential: EulerSwap and Euler Earn could drive TVL to $3-4B in 6-12 months, with 1-3x higher take rates (2-6% vs. 1-2% industry norm).

• Investment Case: $EUL, at $7 with a $1309M market cap, offers 2-5x upside, but faces competition and execution risks.

Investment Thesis for Euler Protocol ($EUL): A Professional Crypto Fund Manager’s Perspective

Overview of Euler Protocol and $EUL

Euler Protocol is a modular, permissionless lending platform on Ethereum, expanding cross-chain to networks like BNB and Base. Its native token, $EUL, governs the protocol, facilitates fee auctions, and supports potential buybacks. After a 2023 hack, Euler recovered to $1.18 billion in total value locked (TVL) by April 2025, leveraging its innovative architecture and curator-led model. With EulerSwap and Euler Earn on the horizon, Euler is positioned to capture significant DeFi lending market share, making $EUL a compelling investment.

Structural TVL Advantage

Euler’s modular design enables curator-led markets, supporting both major assets (e.g., USDC, BTC) and long-tail tokens. Key advantages include:

• Higher Yields: Rehypothecation allows collateral to earn 1-2% higher yields than Aave (e.g., 5-7% vs. 3-5% on USDC), as deposits generate interest while serving as collateral.

• Increased Leverage: A Dutch auction-based liquidation system reduces penalties to <0.5% for large borrowers (vs. 5% on Aave/Morpho), enabling up to 20% higher loan-to-value (LTV) ratios.

• Capital Efficiency: Cross-collateralized vaults optimize liquidity, reducing incentive costs (<$3M vs. tens of millions by competitors), driving organic TVL growth.

Markets like Resolve and Usual highlight Euler’s flexibility, positioning it to capture TVL from Aave ($30B TVL), Morpho ($5B TVL), and a $40B lending market.

EulerSwap and Euler Earn: Catalysts for Growth

Euler is launching two products to boost TVL and revenue:

• EulerSwap: A DEX launching in ~1 month (May 2025), EulerSwap turns lending accounts into just-in-time liquidity providers, offering 40-50x capital efficiency ($1M collateral matches a $40-50M Uniswap pool). Routed through aggregators, it increases borrowing demand, boosting yields and TVL. No protocol fees are planned initially to prioritize volume.

• Euler Earn: An aggregator vault system, launching in 3-6 months, allows capital allocation across Euler, Morpho, and Maker. Its open-market model attracts retail and institutional deposits (e.g., crypto debit card TVL).

These products could drive TVL to $3-4B within 6-12 months, with EulerSwap’s efficiency attracting market makers (e.g., Wintermute maybe) and Euler Earn simplifying yield optimization. Higher utilization could push take rates to 2-6% (vs. 1-2% industry norm), generating $60-240M annually at $3-4B TVL.

Revenue and Tokenomics

Euler generates $2.5M annually in fees at $1.18B TVL, with curators setting fees (10-20%) and the protocol taking half. Fees are auctioned via FeeFlow, with $EUL bids deposited in the treasury. Approximately $150K in $EUL has been burned via early reward claims, with plans for aggressive buybacks/burns once profitable ($2B TVL or cost cuts). The DAO’s $5-7M annual burn rate creates a $2-3M funding gap, but scaling TVL could close this, enhancing $EUL’s deflationary potential. Only 27.18M $EUL tokens will exist, with 17.44M circulating, supporting long-term value.

Competitive Landscape

Euler competes with Aave ($30B TVL), Morpho ($5B TVL), and Maker:

• Aave: Dominant but rigid, with lower yields due to underutilization (<5% on USDC vs. T-bill yields).

• Morpho: Flexible for long-tail assets but lacks rehypothecation, limiting yield and leverage.

• Maker: Focused on stablecoins, less competitive in broader lending.

Euler’s curator-driven markets and cross-chain expansion position it to capture market share, particularly for long-tail and institutional use cases.

Financial Projections

Euler’s path to $3-4B TVL relies on EulerSwap’s adoption and cross-chain growth. Higher utilization could significantly boost revenue.

Metric Current ($1.18B TVL) vs. Projected ($3-4B TVL)Annual Revenue$2.5M$60-240MTake Rate~1-2%2-6%$EUL Price$5.642-5x upside ($11-28)Market Cap$98.39M$180-450MToken Burn$150K$10-50M annually

Risks and Considerations

• Adoption Risk: EulerSwap and Euler Earn are unproven; low volume could hinder TVL growth.

• Competition: Aave’s brand and Morpho’s permissionless model are strong competitors.

• Security: Despite audits, new products carry smart contract risks post-2023 hack.

• Regulatory Uncertainty: DeFi regulations could impact operations.

Investment Opportunity

At $7 with a $130 M market cap, $EUL is undervalued relative to its $1.18B TVL and growth potential. Euler’s structural advantages—higher yields, leverage, and capital efficiency—position it to reach $3-4B TVL, potentially driving 2-5x price appreciation ($11-28). EulerSwap’s DEX model and Euler Earn’s open-market vaults could create a flywheel of TVL and revenue, with buybacks enhancing $EUL’s value. Compared to Aave ($AAVE, $1.5B market cap) or Morpho, $EUL offers higher upside in DeFi lending, though execution risks remain. Investors seeking DeFi exposure should consider $EUL, with due diligence on competitive and regulatory dynamics.

This article is being AI-generated based on the April 15th, 2025 BidCast Episode on $EUL and may contain mistakes. It does not constitute as investment or any advice and does not represent the view of the BidClub.io platform.

Generated by grok.com

BidCast Source: https://www.bidclub.io/posts/cm9mhwbs80004j61s8xkk4twi

Key Citations

• Euler Protocol TVL Data

• Euler Price and Market Cap

• Euler Revenue Metrics

• Morpho Blue and Metamorpho Models (Morpho Docs)

• Aave V3 Market Data (Aave App)