Analysis: HYPE, currently priced at $37, remains undervalued even in the bear market.
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Analysis: HYPE, currently priced at $37, remains undervalued even in the bear market.
HYPE’s current price of $37 has fallen below its bear-market valuation, while the market is completely ignoring HIP-3’s trillion-dollar TAM.
Navigating Web3 tides with focused insightsAuthor: DCo (@Decentralisedco)
Translated and edited by TechFlow
TechFlow Intro: Hyperliquid’s 2025 revenue is 15% of CME’s, yet its market cap is only 10% of CME’s—this valuation discount reflects the market’s complete failure to price in the multi-trillion-dollar TAM unlocked by HIP-3. The Iran War weekend served as a stress test for this thesis: while CME was closed, on-chain oil futures alone sustained real-time global price discovery. This article uses a four-scenario DCF model to demonstrate that HYPE’s current $37 price has already fallen below its bear-case target price of $60—implying that even if HIP-3 achieves virtually no progress, the current price still undervalues Hyperliquid’s core exchange business.
The Valuation Framework for HYPE
CME generated $6.5 billion in revenue in 2025, with average daily contract volume of 28.1 million and a market cap of $114 billion. Hyperliquid recorded $960 million in revenue on ~$3 trillion in trading volume in 2025, with a market cap of $12.5 billion. Hyperliquid’s current revenue is approximately 15% of CME’s, but its market cap is only 10% of CME’s. The key opportunity lies in determining how much of traditional finance’s trading volume can migrate to decentralized platforms like Hyperliquid.
From Crypto DEX to Global Derivatives Exchange
HIP-3 launched in October 2025, enabling permissionless perpetual contract listings. A deployer staking 500,000 HYPE (worth ~$18.5 million at $37 per token) on HyperCore may issue custom markets. Fees from these markets are double those of Hyperliquid’s core listed perpetuals; half accrues to the deployer, and half goes to the Hyperliquid protocol for buybacks. Thus, the protocol earns the same revenue per dollar of trading volume as in core markets, while the deployer receives an additional equal amount as incentive for listing and maintaining the market.
Within five months, HIP-3 volume reached $100 billion, and open interest hit a record $1.2 billion on March 10—up sharply from $260 million the prior month.
HIP-3 supports listing any asset: commodities, stock indices, FX pairs, pre-IPO tokens, etc. Over the past two weeks, HIP-3’s share of Hyperliquid’s total volume rose from 8% to 23%, and nearly half of all trading now occurs on HIP-3 markets.
The Iran War as Proof-of-Concept
On February 28, the U.S. and Israel launched strikes against Iran during traditional market hours. Within hours, oil-linked perpetual contracts on Hyperliquid surged 5%, as traders priced in the shock in real time. The following week, after WTI posted its largest weekly gain since 1983, Hyperliquid’s oil perpetuals saw over $1.2 billion in 24-hour volume and $40 million in liquidations. CL perpetuals’ cumulative volume rose from $200 million to $6 billion over two weeks. Bitcoin traded sideways near $68,000. Macro trading’s primary battleground was Hyperliquid—not spot crypto markets.
When CME reopened Monday, it confirmed Hyperliquid’s pricing direction across the entire weekend. If tokenized oil perpetuals can deliver effective price discovery at this scale, gold, SPX, and FX perpetuals can too.
CME + 0DTE Options as HIP-3’s TAM
CME’s daily volume across all asset classes totals $3.8 trillion. Excluding structurally complex products unlikely to migrate in the near term—such as interest rate derivatives—and crypto products where Hyperliquid already dominates, CME’s addressable daily volume in equity indices, energy, metals, agriculture, and FX stands at approximately $1.2 trillion.
We also incorporate the 0DTE (zero-day-to-expiry) options market. SPX 0DTE options alone averaged over $1.2 trillion in notional value per day in May 2025. Given that SPY 0DTE accounts for 45% of all SPY options volume, FalconX estimates total 0DTE notional value at $1.5–2 trillion daily. Behaviorally, these are perpetual traders using options infrastructure—because stock perpetuals do not yet exist in regulated markets. Perpetuals eliminate the complexity and cost of 0DTE options.
A critical adjustment: 0DTE notional value overstates the equivalent perpetual volume. We apply a 30% conversion factor to 0DTE notional to estimate actual perpetual-equivalent volume likely to migrate. HIP-3’s total addressable market thus amounts to ~$1.74 trillion daily: $1.2 trillion from CME’s addressable volume plus ~$540 billion from the 0DTE conversion.
Scenario Analysis
We construct four scenarios based on Hyperliquid’s capture percentage of the $1.74 trillion daily TAM via HIP-3, modeled using a three-year discounted cash flow (DCF) framework.
Each scenario assumes gradual penetration: 20% of target in Year 1 (2026), 50% in Year 2 (2027), and 100% in Year 3 (2028), reflecting realistic market share accumulation. Baseline revenue from core crypto perpetuals, spot, EVM gas, and auction fees is forecast separately from the revenue waterfall model, rising from $970 million in 2026 to $1.35 billion in 2028.
We apply a 20% discount rate and a 20x terminal multiple on Year 3 revenue—a modest premium relative to CME’s current 17.5x EV/revenue, reflecting Hyperliquid’s higher growth trajectory. The 20% discount rate captures crypto protocol risk, yet acknowledges Hyperliquid as a profitable enterprise with auditable on-chain cash flows—not a pre-product token. Sensitivity tables allow stress testing up to a 30% discount rate.
The model also incorporates expected changes in circulating supply. On the supply side, ~23.8% of total HYPE supply is allocated to core contributors, locked for one year then linearly unlocked over 24 months. Co-founder Iliensinc confirmed distributions (if any) occur on the 6th of each month and added that “unlocking is not linear.” Actual pacing is highly volatile: ~2.6 million tokens unlocked in December (including 850,000 re-locked), 1.2 million in January, and in February the team cut that month’s unlock by 90% to just 1,400 tokens. As Arthur Hayes noted, 66.6% of contributor tokens remain locked until 2027–2028—with zero investor unlocks.
Rather than anchoring to peaks or troughs, we use the monthly average since distribution began—~1 million HYPE per month, or 12 million annually—as our baseline assumption. Validator staking emissions contribute ~10 million additional tokens annually under current conditions (~400 million staked tokens, 2.37% reward rate).
Meanwhile, the Assistance Fund (AF) has burned 42.8 million HYPE over ~16 months since genesis (November 2024), implying an observed annual burn rate of ~32 million. The AF acquires ~97% of trading fees via automated buybacks and holds an additional 42.1 million HYPE in its wallet pending burn. Historical burn rates include periods when HYPE traded at lower price ranges (mostly $10–$25 in 2025), meaning each dollar of fee revenue retires more tokens.
At the current $37 price and ~$2 million in daily trading fees, the forward-looking annual burn rate is closer to 19 million HYPE. Our model uses this 19 million figure as the forward-looking baseline—though the historical 32 million underscores the AF’s strong activity in low-price environments. Crucially, AF burns are endogenously linked to revenue: stronger market conditions yield higher fee income, which drives significantly more buybacks and burns. This creates reflexive dynamics that static supply forecasts cannot fully capture.
The net effect is only modest growth in circulating supply. Starting from ~300 million today, the team unlocks ~1 million per month, and validator emissions add ~10 million annually—totaling ~22 million new tokens annually. Meanwhile, ~19 million are retired annually via AF burns. We project ~302 million by end-2026, ~305 million by end-2027, and ~308 million by end-2028—net additions of ~3 million per year. The buyback engine nearly fully offsets new issuance, resulting in an annual dilution rate of ~1%. Implied HYPE prices are calculated using projected Year 3 supply.
In the bear-case scenario (0.01% capture rate), HIP-3 generates $32 million in fees annually at full run-rate on the conversion-adjusted TAM. Combined with the $1.35 billion baseline revenue, the DCF yields an enterprise value of ~$18 billion based on Year 3 total revenue’s terminal value.
Against the projected Year 3 supply of 308 million (slightly above today’s 300 million), the implied HYPE price is ~$60—still representing a significant premium to the current $37, meaning even minimal HIP-3 progress would justify a higher price based solely on the core exchange economics.
In the base-case scenario (0.10% capture rate), HIP-3 revenue reaches $322 million in Year 3, with total revenue ~$1.7 billion, yielding an enterprise value of ~$22 billion and an implied HYPE price of ~$72.
In the bull-case scenario (0.50% capture rate), HIP-3 fees reach $1.6 billion in Year 3, total revenue hits $3 billion, enterprise value reaches $38 billion, and implied price climbs to ~$124, with a fully diluted valuation (FDV) of ~$124 billion.
In the extreme-case scenario (1.00% capture rate), total revenue reaches $4.6 billion in Year 3, enterprise value hits $59 billion, HYPE approaches $190, and FDV lands in the ~$190 billion range.
At this level, Hyperliquid’s P/S ratio stands at ~13x—still below CME’s current 17.5x—indicating our terminal multiple assumption remains conservative for a business growing this rapidly.
Under the default 20% discount rate and 20x multiple, the current $37 price sits well below the bear-case target of $60—suggesting the market has priced in no meaningful contribution from HIP-3 whatsoever, and arguably even undervalues the core crypto exchange business itself. The base-case $72 target implies ~93% upside from current levels, requiring only a 0.10% capture of addressable volume. Hayes’ $150 target falls between our bull case ($124) and extreme case ($190), demanding a 0.50%–1.00% capture rate. Given that HIP-3—just five months live—already contributes ~10% of fee revenue, these three-year capture targets are ambitious, yet grounded in observable traction.
Why Hyperliquid, Not Another Platform?
A natural objection to the HIP-3 thesis is that if traditional derivatives volume migrates on-chain, it could flow anywhere. We believe this underestimates the inertia of liquidity concentration.
First, consider the competitive landscape. At end-2025, Lighter briefly surpassed Hyperliquid in 30-day perpetual volume—running zero-fee operations and offering one of the industry’s most aggressive incentive programs. Then, on December 30, the $LIT airdrop dropped: $250 million was withdrawn within 24 hours, and Lighter’s volume collapsed over three weeks, shrinking its market share to 8.1%. Despite remaining zero-fee, volume has since flowed back to Hyperliquid. The moat lies in liquidity depth and execution quality—not price. Open interest-to-volume ratios confirm this: Hyperliquid’s is 0.64 (capital retention), Aster’s is 0.18, and Lighter’s is 0.12.
Next, consider centralized alternatives. Coinbase is preparing to launch compliant perpetuals—but consider the user: if you want exposure to stock indices or commodities, you already have Robinhood, Schwab, and Interactive Brokers. Launching SPX perpetuals on Coinbase does not solve its users’ pain points. Hyperliquid solves a different problem: 24/7 settlement, no market-hours restrictions, cross-margining with crypto assets, and permissionless listing. It complements existing systems—not a subpar version of products traditional institutions already offer.
HYPE Is Undervalued
Hyperliquid faces risks. HIP-3 must sustain volume in stock index and commodity perpetuals after novelty fades. The 0DTE crowd needs compelling reasons beyond lower fees to switch to perpetuals. The matching engine must maintain performance at $50 billion daily volume—matching its reliability at $8 billion. These are not existential risks. The core product works. That Iran War weekend proved real demand exists for 24/7 commodity price discovery.
Regulatory clarity in the U.S. for tokenized perpetuals is not a prerequisite for this thesis. Much of Hyperliquid’s volume likely originates outside the U.S. Yet U.S. recognition or approval would accelerate adoption of this category. Every dollar migrating from traditional derivatives to permissionless infrastructure expands the total addressable market—and Hyperliquid, with its liquidity depth, execution quality, and market-maker infrastructure, is positioned to capture a disproportionate share. HIP-4, introducing prediction markets and option-style contracts, opens an entirely new dimension of volume.
HYPE currently trades at a P/S ratio of 10–13x, versus CME’s 25x, ICE’s 23x, and CBOE’s 22x—mature businesses with single-digit growth. Hyperliquid generated $960 million in revenue in its first full year, carries no debt, has no personnel overhead, and features a buyback mechanism returning nearly all trading fees to token holders. No traditional exchange offers this. We expect HYPE will be repriced as exchange equity, with a blended multiple reflecting dual revenue streams from crypto and traditional derivatives—meaning the current $37 price sits below its intrinsic fair value.
This article was inspired by analysis previously published by @FalconXGlobal.
Disclaimer: DCo holds a position in HYPE. This article does not constitute investment advice.
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