A TLDR Of: The Bull Case For Hyperliquid

A few comments from me (Nomatic):

I started using Hyperliquid in December 2023 to explore perpetual trading. Being from Canada, I lacked access to traditional exchange venues, as platforms like Binance, Bybit, and OKX had all ceased operations in the country long ago. I discovered Hyperliquid as one of the few decentralized exchanges (DEX) that offers a centralized exchange-like (CEX) experience. With Hyperliquid, there’s no need for KYC, and it’s accessible to anyone worldwide.

A few days ago, Flo published an excellent article titled "The Bull Case For Hyperliquid." This detailed, data-driven piece presents a compelling argument for Hyperliquid’s future valuation. I highly recommend reading Flo’s full post. However, if you’re new to Hyperliquid, have been hearing a lot about it, and want a quick overview, we’ve prepared a brief TL;DR of their post.

Here’s the original piece by Flo:

TL;DR

Hyperliquid is a decentralized perpetual trading protocol on its own Layer 1 (L1) blockchain, aiming to offer a centralized exchange-like experience with an onchain order book for trading spot, derivatives, and prelaunch markets. This summary focuses on Hyperliquid’s market potential and the bullish case for its token, HYPE, which is currently a top 30 asset with a market cap of ~$9B and an FDV over ~$28B.

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Key Points:

1. The Exchange opportunity

2. The EVM opportunity

3. Revenue Breakdown, Valuations & Comparables

4. Risks

1. The Exchange Opportunity:

   • Perps DEX Leader: Capturing over 50% of the perps DEX volume in recent months.

     

     Hyperliquid has found strong product market fit onchain

   • Growth Potential: Open Interest (OI) is 10% of Binance’s, with expectations for growth as crypto volatility increases.

   • Competitive Edge: Lower fees and strong incentives (40%+ supply for community rewards) could attract users from CEXs

     

     The trend is clear, DEX volume is slowly eating into CEX market share

2. The EVM Opportunity:

   • HyperEVM Launch: A new EVM-compatible chain planned soon, enabling DeFi projects to leverage Hyperliquid’s onchain liquidity.

   • DeFi Expansion: Anticipated launch of various DeFi protocols (AMMs, lending, etc.), enhancing utility and capital efficiency for HYPE.

   • Increased Use Cases: More fees from EVM activity will support staking rewards and token burns, boosting HYPE demand.

3. Revenue Breakdown, Valuations & Comparables:

   • Current Revenue: Generated over $28M in the last 30 days from platform fees and ticker auctions.

     

     Ticker auctions are going parabolic on Hyperliquid right now

   • High Earnings Yield: Among the highest compared to other L1s and L2s.

     

     Hyperliquid is already an industry leader when it comes to earnings

   • Growth Scenarios:

     • Base Case: $59M 30 day revenue.

     • Bull Case: $102M 30 day revenue.

   • Valuation Potential: Price could range from ~$42 to ~$651 per HYPE, with a more realistic target around $100 based on a $40B market cap.

     

     Last cycle saw protocols like Filecoin attain a valuation of $374B FDV

4. Market Potential:

   • Capital Inflows: Significant potential for net new inflows, potentially boosting market cap substantially.

   • Utility Focus: Positioned to become a major platform for utility-based projects and AI-driven applications.

5. Risks:

   • Centralization Risk: Current mainnet validators are centralized, posing trust and performance risks during the transition to decentralization.

   • Ecosystem Quality: Success depends on attracting high-quality DeFi projects.

   • Regulatory Risks: Potential challenges, though mitigated by strategies like geofencing.

   • Market Correlation: HYPE’s performance is closely tied to the overall crypto market trends.

Conclusion: 

Hyperliquid presents a strong bullish case with its leading position in the Perps DEX space, upcoming EVM integration, substantial revenue generation, and significant growth potential for HYPE. Especially if you believe the trend will continue and more trading volume shifts onchain. However, it faces risks related to decentralization, ecosystem quality, and regulatory challenges. As always, investors should conduct their own research (DYOR) before investing.

Disclaimer: None of the above should be construed as a recommendation or endorsement to buy any token(s) mentioned.

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• Nomatic holds HYPE