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 — the valuation discount reflects the market’s complete failure to price in the multi-trillion-dollar TAM opened 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 — meaning even if HIP-3 achieves virtually no progress, this pricing already undervalues Hyperliquid’s core exchange business.
HYPE’s Valuation Framework
CME generated $6.5 billion in 2025 revenue, 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 roughly 15% of CME’s, but its market cap is only 10% of CME’s. The key opportunity lies in determining how much traditional finance 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) can issue custom markets on HyperCore. Fees from these markets are twice those of Hyperliquid’s core listed perpetuals; half accrues to the deployer, and half flows 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 — a sharp increase 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 Was a Proof-of-Concept
On February 28, the U.S. and Israel launched strikes against Iran during traditional market hours. Within hours, oil-pegged perpetuals 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, oil perpetuals on Hyperliquid 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 battlefield shifted to Hyperliquid — not spot crypto markets.
When CME reopened Monday, it confirmed Hyperliquid’s entire weekend pricing direction. 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 average daily volume across all asset classes is $3.8 trillion. Excluding structurally complex, near-term non-migratable rate products and crypto products already dominated by Hyperliquid, CME’s addressable daily volume in equity indices, energy, metals, agriculture, and FX stands at ~$1.2 trillion.
We also incorporate the 0DTE (zero-day-to-expiry) options market. SPX 0DTE options alone exceeded $1.2 trillion in average daily notional value in May 2025. Given 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 0DTE options’ complexity and cost.
A critical adjustment: 0DTE notional value overstates the equivalent perpetual volume. We apply a 30% conversion factor to 0DTE notional to estimate actual migratable perpetual-equivalent volume. HIP-3’s total addressable market thus stands at ~$1.74 trillion daily: $1.2 trillion from CME’s addressable volume plus ~$540 billion from converted 0DTE volume.
Scenario Analysis
We construct four scenarios based on Hyperliquid’s capture percentage of HIP-3’s $1.74 trillion daily TAM, modeled using a three-year discounted cash flow framework.
Each scenario assumes gradual penetration: Year 1 (2026) reaches 20% of target, Year 2 (2027) reaches 50%, and Year 3 (2028) reaches 100%, 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, growing 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 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 monthly on the 6th and added that “unlocking is not linear.” Actual pace varies widely: ~2.6 million tokens unlocked in December (including 850,000 re-staked), 1.2 million in January, and the team cut February’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 an additional ~10 million tokens annually, given ~400 million tokens staked and a 2.37% reward rate.
On the other hand, the Assistance Fund (AF) has burned 42.8 million HYPE over ~16 months since genesis (November 2024), implying an observed annualized burn rate of ~32 million. The AF receives ~97% of trading fees via automated buyback mechanisms and holds an additional 42.1 million HYPE in its wallet pending burn. Historical burn rates include periods when HYPE traded in lower price ranges ($10–$25 for most of 2025), meaning each dollar of fee revenue retired more tokens.
At the current $37 price and ~$2 million in daily trading fees, the forward-looking annualized burn rate is closer to 19 million HYPE. Our model adopts this 19 million forward estimate as the forecasting baseline, though the historical 32 million figure underscores the AF’s aggressive operation during low-price environments. Crucially, AF burns are endogenously linked to revenue: stronger market conditions mean higher fee income and significantly more tokens bought back and burned — creating reflexive dynamics that static supply forecasts cannot fully capture.
The net effect is only modest circulating supply growth. Starting from today’s ~300 million, the team unlocks ~1 million tokens monthly, and validator emissions add ~10 million annually, totaling ~22 million new tokens annually; meanwhile, ~19 million exit annually via AF burns. We project ~302 million by end-2026, ~305 million by end-2027, and ~308 million by end-2028 — a net annual increase of ~3 million. The buyback engine almost fully offsets new issuance, yielding an annual dilution rate of ~1%. HYPE implied price is calculated using the Year 3 projected supply.
In the bear case (0.01% capture rate), HIP-3 generates $32 million in annual fees 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 core exchange economics.
In the base case (0.10% capture rate), HIP-3 revenue reaches $322 million in Year 3, with total revenue ~$1.7 billion, corresponding to an enterprise value of ~$22 billion and an implied HYPE price of ~$72.
In the bull case (0.50% capture rate), HIP-3 fees reach $1.6 billion in Year 3, total revenue hits $3 billion, enterprise value reaches $38 billion, implied price ~$124, and fully diluted valuation ~$124 billion.
In the extreme case (1.00% capture rate), total Year 3 revenue reaches $4.6 billion, enterprise value $59 billion, HYPE approaches $190, and FDV sits around $190 billion.
At this level, Hyperliquid’s P/S ratio would be ~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 falls far below the bear-case target of $60 — signaling the market has priced in no meaningful contribution from HIP-3 and arguably undervalues even 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 HIP-3 has already captured ~10% of fee revenue just five months post-launch, 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, operating zero-fee and running one of the industry’s most aggressive incentive programs. Then, on December 30, the $LIT airdrop dropped — $250 million withdrawn within 24 hours. Within three weeks, Lighter’s volume collapsed, and its market share shrank 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. The open interest-to-volume ratio confirms this: Hyperliquid’s is 0.64 (capital retention), Aster’s is 0.18, and Lighter’s is 0.12.
Now 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 doesn’t solve their users’ pain points. Hyperliquid solves a different problem: 24/7 settlement, no market hours restrictions, cross-margin with crypto assets, and permissionless listing. It complements existing infrastructure — not a subpar clone of traditional institutions’ offerings.
HYPE Is Undervalued
Hyperliquid faces risks. HIP-3 must sustain volume in equity 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 behavior 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 from the U.S. on tokenized perpetuals is not a prerequisite for this thesis. Hyperliquid’s volume likely originates mostly outside the U.S. But U.S. recognition or approval would accelerate adoption. 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-like contracts, opens an entirely new dimension of volume.
HYPE currently trades at a 10–13x P/S ratio, versus CME’s 25x, ICE’s 23x, and CBOE’s 22x — mature businesses with single-digit growth. Hyperliquid achieved $960 million in revenue in its first full year, carries no debt, no legacy personnel overhead, and features a buyback mechanism returning nearly all trading fees to token holders. No traditional exchange does this. We expect HYPE will be repriced as exchange equity, with a blended multiple reflecting dual revenue streams from crypto and traditional derivatives. This means the current $37 HYPE price sits below its intrinsic fair value.
This article was inspired by analysis published by @FalconXGlobal.
Disclaimer: DCo holds a position in HYPE. This article does not constitute investment advice.
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