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Key Points

• Hyperliquid is a decentralized exchange (DEX) on its own layer 1 blockchain, offering fast, low-cost trading of perpetual futures and spot assets, with research suggesting it aims to match centralized exchange performance while maintaining blockchain security.

• Its business model generates revenue from trading fees, distributed to liquidity providers and used for HYPE token buybacks and burns, which seems likely to support token value.

• The HYPE token has a total supply of 1 billion, with allocations for community rewards, team, and foundation, and is used for governance, staking, and fees, with the evidence leaning toward a community-focused distribution.

• Competitors include dYdX and GMX, with Hyperliquid standing out for its high-performance blockchain, though market dynamics are complex and debated.

• Over the next year, price projections are: base case at $18.55 (50% increase), bull case at $37.11 (200% increase), and bear case at $8.66 (30% decrease), acknowledging the uncertainty in crypto markets.

Hyperliquid ($HYPE)

This report provides an in-depth analysis of Hyperliquid, a decentralized exchange (DEX) operating on its own layer 1 blockchain, with a focus on its operations, business model, tokenomics, market position, competitors, and price projections for the next year. Designed for potential investors, it aims to equip readers with the necessary information to make educated decisions, considering the complexities and uncertainties of the crypto market as of March 13, 2025.

Introduction

Hyperliquid has emerged as a notable player in the decentralized finance (DeFi) space, particularly in the niche of perpetual futures trading. Launched in 2022, it has captured significant market attention due to its high-performance blockchain and community-driven approach, making it a potential investment opportunity worth exploring.

Overview of Hyperliquid

Hyperliquid is a DEX built on its own layer 1 blockchain, designed to facilitate trading of perpetual futures and spot assets. It aims to bridge the gap between centralized exchanges (CEXs) and decentralized platforms by offering the speed and efficiency of CEXs, such as low latency and deep liquidity, while maintaining the transparency and security of blockchain technology. Key features include:

• High throughput, currently supporting up to 200,000 orders per second, with plans for further optimization.

• Gas-free trading, reducing costs for users.

• A custom consensus algorithm, HyperBFT, inspired by Hotstuff, ensuring rapid transaction finality and security.

• Two main components: HyperCore for on-chain order books (perpetual futures and spot trading) and HyperEVM for general-purpose smart contracts, enhancing ecosystem flexibility.

This structure positions Hyperliquid as a platform that can house all finance, with a vision for a fully on-chain open financial system

Business Model

Hyperliquid’s revenue model is centered on trading fees, which are critical to its operations and community incentives. As of recent reports, the platform has generated significant revenue, with $96 million in perpetual contract trading revenue noted in early December 2024, and a cumulative trading volume of $428 billion, with an average contract fee rate of approximately 0.0225%. The revenue distribution is as follows:

• 46% allocated to Hyperliquidity Providers (HLPs), who supply liquidity to the platform, similar to liquidity providers in other DEXs.

• 54% used for repurchasing HYPE tokens, supporting its value, with cumulative repurchases exceeding $77 million and an average daily repurchase of $1 million in the last month.

• Additional mechanisms include burning HYPE tokens from spot trading fees, with a cumulative burn of 110,000 HYPE, reducing supply and potentially increasing value.

This model ensures that all revenue is directed back to the community, with no venture capital funding, enhancing its decentralized ethos.

Tokenomics

The HYPE token is the native cryptocurrency of the Hyperliquid ecosystem, with the following tokenomics as of the latest data:

• Utility: HYPE serves multiple purposes, including governance (holders vote on platform upgrades), staking (users lock tokens to secure the network and earn rewards), and paying transaction fees. This multi-utility approach incentivizes participation and strengthens network security.

The distribution, with 38.9% for future emissions and community rewards, suggests a long-term strategy to engage users, while the 31% genesis distribution was fully unlocked at the Token Generation Event (TGE) in November 2024, marking a significant milestone .

Market Analysis and Competitors

Hyperliquid operates within the decentralized perpetual exchange market, which has seen rapid growth, driven by the demand for derivatives trading in crypto. The total addressable market (TAM) for derivatives is massive, with traditional finance exceeding $1 quadrillion in notional value, and crypto derivatives accounting for 70% of the $5 trillion monthly trading volume. Hyperliquid, with a monthly volume of $150 billion, is well-positioned to capture more of this market, especially with plans to expand into spot trading.

Competitors:
Hyperliquid’s main competitors include:

• dYdX: A leading decentralized perpetual exchange, known for its order book model and cross-chain support, but it relies on existing blockchains like Ethereum and Cosmos, potentially limiting performance compared to Hyperliquid’s dedicated L1.

• GMX: Another prominent perp DEX, focusing on low fees and high leverage, but it operates on Arbitrum and Avalanche, which may not match Hyperliquid’s throughput.

• Centralized Exchanges (CEXs): While not direct competitors, platforms like Binance offer similar user experiences, but lack the transparency and decentralization Hyperliquid provides.

Hyperliquid’s edge lies in its high-performance blockchain, with 60% market share in decentralized perpetual futures and a weekly trading volume of $56.8 billion, eight times that of its closest competitor, Jupiter. Its low fees (maker fees as low as 0.01% with rebates, taker fees at 0.035%) and innovative features like HLP vaults for passive income further differentiate it, though market dynamics remain debated among investors.

Price Projections for the Next Year

Given the volatility and uncertainty in crypto markets, we present three scenarios for HYPE’s price over the next year, based on current trends and potential developments as of March 13, 2025. The current price, as referenced from recent data, is approximately $12.37 USD.

Base Case ($18.55):

• Assumptions: Continued growth in trading volume and user adoption, with stable revenue supporting token buybacks and burns. The broader crypto market experiences moderate growth, with no major disruptions.

• Analysis: Research suggests that Hyperliquid’s strong fundamentals, such as its market share and community-driven model, could drive a 50% increase, leading to a price of approximately $18.55. This reflects steady adoption and revenue distribution, as seen in its recent performance

Bull Case ($37.11):

• Assumptions: Significant increase in adoption due to new features (e.g., expanded EVM compatibility, staking enhancements) or strategic partnerships, capturing more market share from both DEXs and CEXs. Positive regulatory developments for DeFi could boost investor confidence.

• Analysis: It seems likely that such conditions could drive a 200% increase, pushing the price to around $37.11, especially given its past performance post-TGE, where it surged from $3.90 to $27.

Bear Case ($8.66):

• Assumptions: A decline in the overall crypto market, increased competition from new DEXs or CEXs offering lower fees, and potential security issues or regulatory challenges impacting user trust.

• Analysis: The evidence leans toward a 30% decrease to $8.66 if these factors materialize, reflecting market downturns and reduced trading activity, as seen in historical bear markets .

These projections are inherently uncertain, given the crypto market’s volatility, and should be considered alongside individual risk tolerance and investment strategies.

Conclusion

Hyperliquid presents a compelling investment opportunity with its innovative DEX model, high-performance blockchain, and community-driven tokenomics. Its ability to generate significant revenue and redistribute it to users, combined with a strong competitive position, makes it attractive. However, investors should be aware of the crypto market’s volatility and consider the base, bull, and bear case scenarios when deciding.

If you are interested making money in crypto consider our premium service. Phenom Premium offers directs buy and sell recommendations from Phenom Ventures Founder, Eric Muschinski.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.