IOSG | Hyperliquid Guide: Disruptive Infrastructure or Overvalued Bubble?
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IOSG | Hyperliquid Guide: Disruptive Infrastructure or Overvalued Bubble?
Hyperliquid is a leading decentralized perpetual contract exchange that has quietly captured 13.6% of Binance's monthly perpetual contract trading volume, generating $116 million in monthly revenue, with 97% returned to ecosystem participants.
Navigating Web3 tides with focused insightsAuthor | Joey @IOSG
In the past few months, Hyperliquid has attracted significant attention. This article aims to bring everyone up to speed on the latest developments and future expectations. It serves both as an introduction to Hyperliquid and includes my nuanced insights into the ecosystem as a whole.
TL;DR
For readers who only want the key points of this article:
Hyperliquid quietly captured 13.6% of Binance's monthly perpetual contract trading volume, generating $116 million in monthly revenue—but most analyses overlook the subtle risk/reward dynamics that will determine whether it becomes a breakthrough infrastructure project in crypto or another DeFi casualty.
Market Position
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Captures 70% of decentralized perpetual contract trading volume, with daily volume reaching 9.9% of Binance’s
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665,000 traders generate an average of $300,000 in monthly trading volume per user (65x more trading-intensive than Binance retail users)
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$4.4 billion in USDC on the platform accounts for 71% of total USDC locked across Arbitrum
Fundamentals
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$116 million in monthly revenue, with 97% returned to ecosystem participants
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38% of total token supply (388 million HYPE) reserved for future growth incentives
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24 validator nodes securing the network vs over 1 million on Ethereum (a trade-off between centralization and performance)
Competitive Landscape
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An estimated 15–25% of volume is likely wash trading (better than industry standard but still a concern)
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Grew share of Binance's perpetual market from 2.2% to 13.6% within 12 months
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Jupiter platform achieved $32 billion in 60-day perpetual volume—indicating intensifying on-chain competition
While most focus on token price appreciation, I analyze its underlying business sustainability across multiple market cycles, including bear market stress tests and competitive pressures.
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The upcoming unlock of 238 million tokens starting at year-end will create ~$17 million in daily selling pressure—equivalent to 8x current buyback capacity, a structural headwind most bulls ignore
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$600 million in Nasdaq-listed treasury bond holdings and VanEck endorsement suggest non-retail demand may absorb unlocking pressure, though institutional adoption timeline remains uncertain
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Zero gas fees + 0.2-second latency + built-in order book create switching costs, but technical debt and consensus limitations could erode advantages
Hyperliquid may face user attrition due to token depreciation and compressed yields, but its 97% fee return model and sustainable revenue generation make it a promising multi-cycle infrastructure project.
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Unlike traditional DeFi protocols reliant on token emissions or subsidized yields, Hyperliquid generates income from real economic activity and returns nearly all of it—demonstrating resilience when unsustainable yield models collapse
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Expected 60–80% drawdown during 2025–2027 unlocks, but business acumen and infrastructure advantages position it to emerge strongly during industry consolidation
This article goes straight to what truly determines Hyperliquid’s long-term success: sustainable business model, competitive positioning, and the ability to survive multiple cycles amid industry-wide existential crises.
Wat Happen?
The known part—Hyperliquid is a leading decentralized perpetual exchange (Perpetual DEX) seeking vertical expansion. It commands 60% of decentralized perpetual market volume, driven by regulatory arbitrage, airdrops, excellent UI/UX, deep liquidity, and strong community consensus.
Early Growth
Users can access a perpetual exchange with seamless UI/UX without KYC (though regional regulations still apply). Enabled by:
Zero Gas Fees and Low Trading Costs
Unique order cancellation and post-only priority mechanism outperforms other types (e.g., IOC), significantly reducing toxic flow from high-frequency trading (HFT)—by over 10x. For technical details, read about precompiles:
x.com/emaverick90/status/1919727174426284488
Intuitive Interface
One-click DeFi operations
Ultra-Fast Trading Experience
0.2-second block time, achieving 20k TPS on-chain via unique consensus model
Strong Market Making and Liquidity Provision
Initially bootstrapped by Hyperliquid core team
In a crypto world where everyone in a bull market seeks easy leverage (meme coins, prediction markets, derivatives, altcoin beta, etc.), perpetuals found product-market fit (PMF) as the simplest leveraged access.
Airdrop
Then came their airdrop—covering nearly 94,000 wallets, with each participant receiving $45,000–50,000 worth of HYPE:
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No immediate insider sell pressure
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Wide user ownership fostered loyalty and alignment
Notably, the Hypios community also delivered generous airdrops to holders, and even meme coins on Hyperliquid (like $BUDDY, $PURR) maintained low sell pressure and strong holder conviction.
Since traders and deep DeFi users received tokens, many chose to stake (to reduce trading fees) and deposit into HLP vaults (https://hyperliquid.gitbook.io/hyperliquid-docs/hypercore/vaults/protocol-vaults), enhancing their trading experience and kickstarting a powerful flywheel effect.
Heavy users, empowered by newfound wealth, stayed active—fee revenue funded token buybacks—strengthening product and market presence—Hyperliquid attracted more users and volume.
As a result, this broad distribution helped HYPE avoid the typical post-airdrop price drop. In fact, over the following months, HYPE surged 1,179%—from $3.90 at launch in November 2024 to $47 by August 2025.
The HyperEVM
On February 18, HyperEVM officially launched.
▲ Source: ASXN
It is not a standalone chain, but secured by the same HyperBFT consensus as HyperCore. Both share state and essentially use a blobless version of the Cancun hard fork.
Developers can now access a mature, liquid, high-performance on-chain order book. For example, a project can deploy an ERC20 contract on HyperEVM using standard EVM tools and permissionlessly list the corresponding spot asset on HyperCore auctions. Once linked, users can use the token in HyperEVM apps and trade it on the same order book.
This empowers developers and communities by enabling broader use cases. It allows the large user base and liquidity aligned with Hyperliquid to leave deeper marks in the ecosystem. It also improves liquidity through a composable, programmable layer, opening another path for Hyperliquid usage to flow back to participants.
Notably, this also opens pathways for projects outside the Hyperliquid ecosystem to join. For example, Pendle has integrated with HyperBeat and Kinetiq’s LST and LoopedHYPE’s WHLP & LHYPE (https://x.com/looping_col/status/1955645499970560311). EtherFi and HyperBeat are launching preHYPE (https://thedefiant.io/news/defi/etherfi-expands-to-hyperliquid-ecosystem-through-collaboration-with-hyperbeat). Morpho offers vaults on HyperBeat, curated by top institutions including MEV Capital, Gauntlet, Re7 Labs, and others.
HyperEVM’s network effects aren’t about cloning or EVM compatibility—they’re about creating a programmable financial operating system where code, liquidity, and incentives are natively aligned and instantly accessible. Liquidity doesn’t fragment; instead, it compounds as more use cases, yield sources, and protocols integrate. As the full tech stack enriches, both users and developers benefit, making the Hyperliquid ecosystem a gravitational center for future DeFi.
Wat Now?
Hyperliquid already possesses all necessary liquidity and infrastructure within an ecosystem full of financialized individuals—farmers, quants, developers, traders—you name it. So how does it expand outward?
Builder Codes
Hyperliquid launched Builder Codes (learn more: https://hyperliquid.gitbook.io/hyperliquid-docs/trading/builder-codes), allowing platforms to integrate with any distribution channel and earn a share of fees. For Phantom wallet with 17 million users, this is a golden opportunity to expand use cases and boost revenue.
HIP Proposal Overview
Beyond that, Hyperliquid Improvement Proposals (HIP1, 2, 3) deepen the tech stack vertically.
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HIP-1 is a standard for deploying native tokens and on-chain spot order books.
Learn more: https://hyperliquid.gitbook.io/hyperliquid-docs/hyperliquid-improvement-proposals-hips/hip-1-native-token-standard
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HIP-2 focuses on permanently injecting liquidity into spot order books for HIP-1 tokens.
Learn more: https://hyperliquid.gitbook.io/hyperliquid-docs/hyperliquid-improvement-proposals-hips/hip-2-hyperliquidity
The Unit project strongly drives HIP-2 adoption by offering a more native spot trading experience. Essentially, Unit is a multisig wallet allowing traders to index native chains and trade permissionlessly on Hyperliquid. (Learn more: https://docs.hyperunit.xyz/)
But arguably the most impactful update is HIP-3: https://hyperliquid.gitbook.io/hyperliquid-docs/hyperliquid-improvement-proposals-hips/hip-3-builder-deployed-perpetuals
HIP-3 introduces permissionless, builder-deployed perpetual markets on core infrastructure. Before HIP-3, only the core team could launch perpetual markets; now anyone staking 1 million HYPE can deploy their own market directly on-chain.
The process:
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Stake 1 million HYPE
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Define market details: market name and code (still auction-purchased like spot), collateral type, oracle source and fallback logic, leverage and margin parameters, contract specs, and funding mechanism.
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Set fee structure (base trading fee and custom fees), decide fee share for market deployer (up to 50%).
Similar to Binance-Circle revenue sharing.
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Deploy market
Market operators must bootstrap liquidity themselves, while Hyperliquid receives the other 50% of fees (which flows back to HYPE token). Note: these markets won’t appear directly on Hyperliquid’s main interface, but anyone can choose which markets to connect. This shifts Hyperliquid from just a launchpad to more of an asset provider.
To date, Hyperliquid has successfully conquered these core areas:
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High-performance trading engine: delivers CEX-mimicking experience for spot and perpetuals.
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Includes leveraged trading and spot transfer functions.
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Consumer-grade UX combined with distribution channels.
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EVM as programmable execution layer: built a programmable layer (HyperEVM) tightly coupled with UX and liquidity hub.
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Stablecoin infrastructure: successfully attracted $5.6 billion USDH into its ecosystem.
For Hyperliquid itself or other projects in its ecosystem (based on HyperEVM), vast opportunities remain:
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Native fiat on/off ramps: build easier, lower-cost bridges between fiat and crypto.
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Payment solutions: leverage its fast, low-cost network to develop new payment applications.
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Web2-grade consumer apps: build complex decentralized products matching Web2 UX to attract broader audiences.
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Risk management engines: create better risk and hedging tools for institutions and advanced traders.
Current State of Token/Liquidity
The Assistance Fund’s buyback program shows 28 million HYPE repurchased so far, funded by 54% of total revenue (46% of perpetual fees go to HLP depositors, meaning 92–97% of total revenue is returned to users), averaging $2.15 million in daily buybacks.
Currently, 38% of the 1 billion HYPE supply remains reserved for airdrops and incentives, potentially fueling further ecosystem usage. However, this is a double-edged sword—as such a large increase in circulating supply could create massive sell pressure far exceeding current buyback capacity.
In terms of USDC inflows, Hyperliquid continues growing, now holding ~$4.4 billion. Surprisingly, this accounts for 71.11% of total USDC locked across Arbitrum—all actively used within the Hyperliquid ecosystem.
Using non-HLP trading volume metrics (cumulative $4.3 trillion), since HLP acts as passive LPs/platform pool internalizing order flow and hedging risk, non-HLP volume represents peer-to-peer user flow. Notably, this user-to-user flow still includes:
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Market makers
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~20% regular farming accounts and systematic strategy vaults (see appendix)
More market makers is a "sweet problem" for an exchange. In fact, Jeff mentioned there are already "too many" market makers.
At time of analysis, daily unique traders numbered 46,925. Statistics show sum of traded asset percentages exceeds 100% because one address trades multiple assets. This multi-asset overlap indicates Hyperliquid isn't just a single-asset trading venue—traders engage multiple assets per session, signaling high platform stickiness and cross-asset speculation. Meanwhile, trader count on Hyperliquid is growing steadily.
So What Does This Mean?
For now, every component seems to depend on bringing users into HyperCore infrastructure and returning value to the ecosystem in some way:
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HyperEVM brings more volume + a stable financialization layer to hyperliquid.
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Builder Codes help extend hyperliquid’s distribution, bringing fees back to HYPE token.
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HIP-3 enables permissionless market creation and shares fees with HYPE token.
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HYPE token inflation benefits stakers and generally brings higher yields to HyperEVM.
With HYPE token as the perfect marketing tool and optimal way to coordinate community development, Hyperliquid has formed a tightly-knit, almost cult-like community. Ultimately, if leveraged trading is a valuable experience for consumers, Hyperliquid’s flywheel will keep spinning.
Wat Next?
Bearish Case
Potential Regulatory Crackdown
Perpetuals provide end-users leveraged market access. Without proper KYC/AML, money laundering risks exist. Platforms may be forced to implement stricter compliance and report large transactions. Like Polymarket, U.S. users may eventually need KYC to access the platform.
Token Unlock Risks
If mishandled, locked airdrop supply could trigger massive sell pressure.
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238 million core contributor tokens (23.8% of total supply) begin linear unlock on November 29, 2025.
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Estimated equivalent daily sell pressure of ~$17.3 million during 2027–2028.
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Insider ownership jumps from current 15.9% to fully diluted 45.8%.
Why it matters:
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Current Assistance Fund buyback capacity is only ~$2 million daily
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Creates 8.6x sell pressure vs buyback capacity
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Timing overlaps with post-Bitcoin halving downturn in 2027–2028
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To maintain price equilibrium, would require 6–7x fee revenue growth
Liquidity Fragmentation Risk
With many new distribution formats emerging on Hyperliquid L1 (e.g., Builder Codes and HIP-3 markets), volume risks flowing to other venues. Although fees ultimately flow back to HYPE (albeit possibly discounted), and Hyperliquid controls core markets and distribution, the risk remains.
Diminishing Buyback Effect and Flywheel Breakdown Risk
Buybacks have diminishing marginal impact on price. If Hyperliquid’s adoption and revenue fail to match market growth expectations or opportunity cost of holding other tokens, the flywheel could break (macro trends may also suppress price, see April 2025 example). A mitigating factor is game theory: if price drops low enough, buybacks consolidate and push price back up. But core risk lies in how many users are on the platform solely for the HYPE token.
Security and Trust Comparison
Retail users love Hyperliquid’s UX but still prefer Ethereum for asset storage—due to stronger validator set (800k vs HL’s 16), longer security track record, and harsher slashing penalties (HL’s consensus is secure but more centralized, concentrating penalty risk). Incidents like $JELLYJELLY also raised community concerns about security and governance.
Lack of Development Funding
97% of fees go to buybacks, leaving zero budget for growth, marketing, or security incentives. Any governance proposal diverting funds for development would be doubly negative for token holders. Competitors actively fund ecosystem growth, while Hyperliquid keeps itself “starved.”
Bullish Case
Growth Drivers
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EVM integration and better interoperability attract massive capital inflows
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HIP3 markets bring traditional finance capital from institutions and retail
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Continued expansion of main-site perpetual markets
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38.8% of token supply reserved provides ammunition for growth via airdrops
USDH Yield Potential
~$5 billion in USD deposits on platform; with USDH introduced, annual yield could reach $150–200 million at current U.S. Treasury rates. Redirecting this income (previously retained by Circle) to HYPE buybacks would be highly beneficial for the ecosystem.
Multi-Chain Expansion
LayerZero enables one-click deposits from any LayerZero chain, initial assets include USDT0, USDe, PLUME, COOK. Breaks single-chain ceiling, leads in L2 order flow capture.
Fee Advantages
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Current fee rate ~2.8 bps vs competitors’ ~1 bps
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Zero gas orders + on-chain matching enable sustainable profitability
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Remains profitable even if fees halved
CEX Trust Crisis Opportunity
CEX incidents (e.g., FTX) damaged trust. Hyperliquid, as semi-trusted neutral infrastructure, promotes blockchain ideals with CEX-like experience, narrowing gaps in custody decentralization, operational cost, and regulatory arbitrage.
However, comparing spot volume directly with perpetual volume is like comparing apples and oranges. To clearly distinguish Binance and Hyperliquid (HL) in spot vs perpetual markets, consider:
Daily Volume (September 9, 2025)
30-Day Volume
Estimated based on Messari’s $730B monthly total volume and daily ratio messari
Their market positioning is entirely different. One primarily serves off-chain users, the other targets on-chain users. The chart below shows dominance in their respective domains.
User Base Analysis
Trading Intensity
Based on rough estimate of 25 million active users
Market Share
To date, every builder I’ve interacted with in the Hyperliquid ecosystem has been a hard-working, value-creating, community-driven team. This culture stems largely from how the ecosystem has been guided—from product to airdrop and everything in between.
To push crypto to the masses, this space needs to create new value and better experiences for potential retail newcomers. Fundamentally, I believe Hyperliquid can deliver many such products.
Examples:
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Outstanding trading interface (on-chain Robinhood): access on-chain liquidity while delivering seamless financial experience. If crypto wants a better financial architecture, we need a better interaction portal to abstract away confusing UI/UX.
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Pre-IPO products: With $PUMP’s ICO/TGE (token generation event), we saw pre-markets facilitated on perpetual exchanges allow speculation and better price discovery for underlying assets. Replicating this for Pre-IPO assets would offer intuitive real-value arbitrage (this tweet explains well: https://x.com/j0hnwang/status/1947330391590752532).
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Addressing fragmentation: With many new markets (HIP3, other CLOBs, etc.), liquidity and UX may gradually fragment. Projects like https://superstack.xyz offer solid solutions—just as 1inch did for DEXs, Jumper for cross-chain, Beefy for yield farming.
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Real-world assets (RWA): HIP3 enables off-chain assets like SPX to be accounted on-chain. Other RWAs will bring more sustainable, revenue-backed yield and financial activity, helping drive ecosystem growth.
In summary, Hyperliquid adopts a user-centric approach. From core team product decisions to thousands of vision-aligned builders, the entire ecosystem is designed so that ultimate winners are those who create value rather than extract it. Newcomers now have equal opportunity to prove their insight without interference from bad actors, and access a rich, mature ecosystem. Whether any product survives bear market cycles remains a mystery to all, but personally, I am highly hopeful about their ability to rebound and continue attracting builders.
This isn’t a bet on HYPE price rising or yields staying high—it’s a bet that building real businesses with real users and real revenue will ultimately win, even if the path includes significant volatility and user churn.
The market will likely give you multiple chances to accumulate this thematic asset at distressed prices. The question is, do you believe that in crypto’s long-term evolution, business wisdom and sustainable revenue models matter more than short-term token games.
The room for growth is vast, but like any venture investment, I believe it’s in the right hands.
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