Research by on-chain analytics provider, Glassnode, has taken a deep dive into the economics and value of the SUSHI token, revealing that it may be worth far less than its current price. And that’s after the token’s price took a massive 70% dive over the past week to $2.36. 

Glassnode analyst Liesl Eichholz broke down the tokenomics of SushiSwap’s native SUSHI token. The research stated that the value of protocol governance should not be understated, but it is difficult to quantify, suggesting that such yield farming incentives are largely driven by hype.

The rate of inflation is the primary issue that should be addressed when assessing SUSHI’s valuation, Eichholz said, adding that newly minted tokens doled out as rewards will dilute the holdings of existing investors.

Inflation has been incorporated into the system by design, in order to encourage people to actively provide liquidity.

But investors should be aware: anyone holding SUSHI without providing liquidity will be diluted.

A 0.05% buyback reward generated from trading volumes is used to distribute newly minted tokens back to existing holders. Therefore a certain amount of daily trading volume must be sustained to maintain a given price.

Using this chart, the report suggested that without insanely high volumes, a SUSHI price above $10 is preposterous and unsustainable.

“In reality, assuming that SushiSwap captures a more realistic daily trading volume of $400 million, the sustainable price for SUSHI would be $0.31 – a full 97% lower than its all-time high of $11.93.”

The analyst stated that token prices are likely to remain inflated in the short term due to hype and a lack of understanding about its fundamentals.

The SUSHI price took a massive dive over the weekend when it was revealed that the founder had sold 2.5 million of them he acquired via a 10% development fund share. Control of the protocol was then handed over to the CEO of crypto derivatives exchange FTX, Sam Bankman-Fried, following massive backlash from the community.

Bankman-Fried, who is also the CEO of Alameda Research, stated that SushiSwap is currently undergoing migration, adding “after that, it’ll be community-run, not run by me.”

SUSHI prices hit an all-time high of over $11 just after its launch, but they have been heading back to earth ever since and are currently almost 80% off that peak at $2.36 according to Uniswap’s token price tracker.

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