How Should We Value Hyperliquid?

This episode offers a deep dive into Hyperliquid's explosive growth and unique economic model, exploring how its innovative approach to perpetuals, spot markets, and builder codes is reshaping the decentralized exchange landscape and presenting novel valuation challenges.

Revisiting Past Predictions and Hyperliquid's Trajectory

• The discussion kicks off with the panel reflecting on their previous assessments of Hyperliquid, particularly concerns raised a few months prior.
• Omnia addresses initial skepticism surrounding Hyper EVM (Ethereum Virtual Machine), a compatibility layer on the Hyperliquid blockchain allowing Ethereum-based smart contracts. He defends its rollout, stating, "people called Hyper EVM a failure when it went live. And I think this is a pretty [censored] take honestly... Jeff put it really well when saying that a literal jet engine was changed in mid-flight."
  • Omnia, a builder on Hyper EVM, notes the team explicitly called it an alpha/beta and emphasizes the technical achievement of integrating an EVM with a high-performance exchange with minimal downtime.
  • He believes the risk of Hyper EVM not gaining traction has been "very much proven wrong," citing significant adoption, including from the Solana community.
• Max revisits his earlier concerns about regulatory headwinds, particularly whether Hyperliquid would be "allowed to compete on even terms." He expresses pleasant surprise with positive developments in crypto policy, viewing this risk as smaller now.
  • Max also highlights the Hyper EVM's success, noting its deployment in February and subsequent growth to approximately $1.6 billion in TVL (Total Value Locked), a metric representing the overall value of assets deposited in a decentralized finance protocol.

Actionable Insight for Crypto AI Investors/Researchers: The rapid adoption and TVL growth of Hyper EVM, despite initial skepticism, signals strong market fit and execution capabilities. This resilience and ability to integrate complex technologies seamlessly are key indicators for investors evaluating new Layer 1 ecosystems that could potentially host AI-driven applications or data markets.

Hyper EVM Adoption and Team Communication Style

• Bokio, the host, shares his surprise at the Hyper EVM's usage patterns. He initially expected it to focus on lending, margin, and LSDs (Liquid Staking Derivatives) – tokens representing staked assets that remain liquid. However, data revealed significant activity in swapping and AMM (Automated Market Maker) usage, alongside NFT trading.
  • An AMM is a decentralized exchange protocol using algorithms and liquidity pools for asset pricing, contrasting with traditional order books.
• There's an observation of a shift in general crypto chat, with Hyperliquid and Hyper EVM tokens gaining a noticeable share of discussion alongside Solana tokens.
• Omnia comments on Hyperliquid's unique communication style: they often release significant updates, like cutting block times in half (to 1 second recently), with minimal fanfare or pre-announcement.
  • While this means less of a formal roadmap, Omnia views it positively: "it's refreshing that they don't talk [censored] before it's actually done, which is great." He also stresses that the team actively incorporates community feedback from Discord and Telegram.

Actionable Insight for Crypto AI Investors/Researchers: Hyperliquid's lean communication and rapid, feedback-driven iteration present a model of agile development. For Crypto AI projects, which often operate in fast-moving and experimental domains, such an approach can be crucial for adapting to market needs and technological breakthroughs.

Perpetual Market Dominance and Competitive Landscape

• Tolks reflects on his previous "bear case" concern: the sustainability of Hyperliquid's points program in the face of competition in the Perpetual Futures Contracts (Perps) market. Perps are derivatives allowing speculation on asset prices without expiry.
  • He now believes Hyperliquid has definitively won this battle: "Hyperliquid has definitely done that and like you can put that argument to bed now."
• The data supports this, with the DEX-to-CEX (Decentralized Exchange to Centralized Exchange) futures trade volume ratio reaching 25%, and Hyperliquid commanding around 90% market share among relevant perp DEXs.
• Tolks notes that while other protocols have launched points programs, Hyperliquid's execution and overall product have set it apart.

Actionable Insight for Crypto AI Investors/Researchers: Hyperliquid's success in capturing and retaining perp DEX market share through effective incentive mechanisms offers a case study. Researchers can analyze this model for bootstrapping network effects and user adoption in other decentralized applications, including potential AI marketplaces or decentralized compute platforms.

Future Growth: Navigating Perpetuals and Spot Market Opportunities

• Sunonny (Monk) from Messari, known for his Hyperliquid valuation reports, offers a nuanced perspective on Hyperliquid's growth. He suggests that much of the perp volume captured so far was latent on-chain demand.
  • He posits that future perp growth might become a "slow grind" as Hyperliquid needs to win users from CEXs or create net new on-chain traders.
• However, Sunonny sees a significant, largely untapped opportunity in spot trading (direct buying and selling of assets for immediate delivery). "The real opportunity is actually on the spot side where you haven't really seen any performant on-chain order books be able to take even on-chain volumes from AMMs."
  • He notes that major assets like BTC, ETH, and SOL are still primarily traded via AMMs on-chain. Hyperliquid's order book could capture this volume.
  • Spot volumes on CEXs typically represent about 30% of derivatives volumes, indicating a substantial "white space" for Hyperliquid.

Actionable Insight for Crypto AI Investors/Researchers: Investors should closely monitor Hyperliquid's strategic push into spot markets. Success in this arena could unlock a new, substantial growth vector, significantly increasing its overall market capture and providing a larger, more liquid platform for diverse financial activities, potentially including those involving tokenized AI assets or services.

Attracting New Users and the Strategic Value of Hyperliquid Listings

• Omnia highlights the "ridiculous" volume per user on Hyperliquid, despite having sub-1 million registered addresses compared to hundreds of millions on major CEXs.
• A key trend discussed is projects increasingly prioritizing Hyperliquid listings, sometimes over CEXs, due to lower costs and higher impact. Omnia suggests teams are tired of high CEX listing fees.
• Sunonny corroborates this, sharing insights from market makers: "Dude, the hyperliquid flow is like the most profitable flow we've ever seen because everyone's like James Wyn is out here with a billion dollar Bitcoin notional position just like with no real thesis." This "dumb flow" is highly attractive to sophisticated market-making firms.
• Tolks adds that "liquidity begets liquidity," a fundamental crypto principle, underscoring the importance of Hyperliquid's deep liquidity for both perps and its growing spot market.

Actionable Insight for Crypto AI Investors/Researchers: The profitability of "unsophisticated" flow on Hyperliquid indicates market inefficiencies that advanced trading algorithms, potentially AI-driven, could exploit. For AI researchers, the rich on-chain behavioral data from Hyperliquid offers a valuable dataset for developing and testing market analysis and prediction models.

Builder Codes: A Paradigm Shift in Liquidity Access and Monetization

• Max champions Builder Codes, a Hyperliquid feature allowing third parties to submit transactions for users and earn fees. He envisions this evolving into a "proto Shopify," enabling widespread, permissionless creation of front-ends and services tapping into Hyperliquid's deep liquidity.
  • This model allows for unlimited organizations to engage in user acquisition and retention for Hyperliquid.
• Omnia passionately argues the significance of this innovation: "builder codes alone should make Hyperliquid worth, you know, several other L1s combined... There's no product on planet Earth right now that literally hands you $4 billion of liquidity, says, 'Hey, we're not going to charge you [censored] for this.' And then you can go and make money on it."
• The panel discusses how even smaller CEXs might eventually use Builder Codes to delegate their backend to Hyperliquid, cutting costs and accessing superior liquidity.

Actionable Insight for Crypto AI Investors/Researchers: Builder Codes represent a powerful B2B2C model for decentralized platforms. Crypto AI researchers should explore how similar permissionless, incentivized integration frameworks could foster the development, distribution, and monetization of AI-powered services or autonomous agents on decentralized networks. This model could significantly lower barriers to entry for AI developers.

HIP3 and Decentralizing Market Creation

• Max explains HIP3 (Hyperliquid Improvement Proposal 3), a mechanism for decentralizing the deployment of new perpetual markets.
  • Individuals or entities staking 1 million Hype tokens (valued at ~$40 million at the time of discussion) can participate in auctions for the right to deploy a new perp market.
  • Winners are responsible for hosting the price oracle for that market, with their bond slashable by validators if the oracle malfunctions.
  • Max emphasizes, "this is a decentralization vector. So, HIP3s would not be hosted on HL.xyz, which is just one of many interfaces to the Hyperliquid blockchain."
• This is distinct from HIP1 (Hyperliquid Improvement Proposal 1), which governs spot market listings. Spot listing auctions are now priced in Hype tokens (minimum 500 Hype), moving from a USDC-based system.

Actionable Insight for Crypto AI Investors/Researchers: HIP3 and HIP1 demonstrate a commitment to progressive decentralization and community governance over core platform functionalities. For investors seeking long-term sustainable decentralized networks, these mechanisms are crucial. Researchers can study these governance models for insights into creating robust, community-driven platforms for AI data or model sharing.

Contrasting Revenue Models: Hyperliquid vs. Centralized Exchanges

• Omnia draws a sharp contrast between the revenue models of major CEXs like Binance and Hyperliquid.
  • He characterizes Binance's model as partly reliant on fees extracted from token projects for listings, with benefits (like Launchpool APR) passed to BNB holders.
• In contrast, Hyperliquid uses "essentially 100% of its revenue to buy back Hype." Omnia notes this isn't even a traditional "buyback" as tokens were never initially sold in a public sale or to VCs but distributed via a points program.
  • This revenue, derived from trading fees (which function as de facto gas fees on Hyper Core, the exchange's engine), directly benefits Hype holders by reducing circulating supply.

Actionable Insight for Crypto AI Investors/Researchers: Hyperliquid's aggressive token buyback mechanism, funded by substantial and real protocol revenue, creates a direct and powerful value accrual pathway to the Hype token. This strong tokenomic linkage is a key differentiator for investors comparing L1s and DEXs, and a model for sustainable token economies in AI-related crypto projects.

Valuation Approaches: Sum-of-Parts, Comparables, and Speculative Dynamics

• Sunonny details his sum-of-parts valuation approach for Hype, combining its value as a leading Perp DEX with an L1 premium for Hyper EVM.
  • His initial conservative base case was $8 billion for the perp exchange and a $5 billion L1 premium. He notes Hyperliquid has already "blasted through my bullcase" in terms of volume, hitting 2027 projections already, partly due to spot market contributions.
  • He now believes fundamentals could support a $30-40 billion valuation.
• Sunonny emphasizes that "nobody knows how to value Hyper Core. Like people people have no idea what it is...this is the use case." He views fundamentals as a floor, with speculative premiums emerging based on comparables like BNB or SOL.
• The team's continuous addition of "sneaky valuation drivers" like HIP3 (where staking Hype becomes a no-brainer if Hype is cheap but platform usage is high) and staking tier benefits further complicates simple valuation.

Actionable Insight for Crypto AI Investors/Researchers: Valuing hybrid crypto-assets like Hyperliquid, which combine application-layer revenue with platform-layer potential, requires a multi-faceted approach. Investors should consider fundamental revenue generation, L1 platform utility, tokenomics, and market sentiment. The unique nature of Hyper Core as core trading infrastructure makes direct comparisons difficult but also underscores its strategic importance, a lesson applicable to valuing novel AI-integrated crypto platforms.

Beyond Numbers: Compliance Hurdles, Onboarding Potential, and Unique Supply Mechanics

• Omnia points out a significant, often overlooked factor: many institutional players and large funds are "force sidelined" from Hyperliquid due to internal compliance mandates or lack of custodial support. This represents substantial latent demand.
  • He notes that major custodians are now starting to support Hyper EVM and eventually Hyper Core, which could unlock this capital.
• Max underscores the unparalleled supply dynamics of Hype. "I think most, last time I checked, right, like we would have eaten away the entire circulating supply within 5 years. Compare that to literally any other asset in this industry, right? And it's just like unparalleled."
  • This is due to the aggressive buyback and burn of Hype tokens funded by protocol revenue, with Hyperliquid removing approximately 2% of its current circulating supply per month.

Actionable Insight for Crypto AI Investors/Researchers: The combination of a fixed, deflationary supply for Hype and significant untapped institutional demand (pending compliance and custodial solutions) presents a strong long-term value proposition. Researchers can study Hyperliquid's tokenomics as a case of designing for scarcity and sustained value accrual, potentially applicable to tokens underpinning decentralized AI networks.

Market Sentiment, Relative Strength, and Comps-Based Outlook

• Tolks brings the conversation to market dynamics, emphasizing the importance of sentiment and relative strength in crypto.
  • He argues that while fundamentals are important, "what drives these markets is maybe 10% fundamentals if that."
  • He highlights Hype's strong performance relative to major assets like SOL and BTC, especially its rapid recovery after market selloffs: "look at what bounces the hardest from the bottom and it's very clear that hype was that token this year."
• Tolks suggests that comparables (comps) matter significantly. If assets like Sui, Solana, or Bitcoin reach certain valuations, the market will naturally re-rate Hype. He sees Hype potentially entering the top 10 crypto assets with a doubling in price.

Actionable Insight for Crypto AI Investors/Researchers: While fundamental analysis is crucial, investors in the volatile crypto space must also track market narratives, sentiment, and relative asset strength. Hype's robust performance post-selloff indicates strong market conviction, a factor that often precedes further upside in momentum-driven markets. This applies to assessing any emerging technology asset, including those at the Crypto AI intersection.

Hyper EVM's Growing Revenue and Value Accrual to Hype

• Bokio presents data indicating Hyper EVM's monthly revenue (from priority tips and base fees) is around $1 million. This places it ahead of several established L1s and L2s like Avalanche, Polygon, Optimism, and ZK Sync in terms of network fee generation.
• The panel clarifies that these Hyper EVM network fees are likely burned, directly contributing to Hype's value accrual by reducing its supply, similar to how Hyper Core trading fees benefit the token.

Actionable Insight for Crypto AI Investors/Researchers: The burgeoning revenue from Hyper EVM, even in its early stages, adds another significant layer to Hype's value accrual model. For AI researchers and developers, the transaction fee mechanics and revenue distribution on emerging L1s like Hyperliquid can inform the design of sustainable economic models for on-chain AI services and data marketplaces.

The Critical, Underrated Factor: Known and Deflationary Supply

• Tolks and Omnia passionately reiterate the profound importance of Hype's tokenomics: a known, fixed, and actively deflationary supply.
  • Tolks states, "it's one of the only alt assets where you understand the supply and you understand what is coming and like that I think is entire is still like largely underrated by the market."
• Omnia provides specifics: 42% of the total Hype supply remains for community distribution (valued at over $10 billion at the time of discussion). Around 19-20% of the total supply is "ready for sale," meaning it's liquid in wallets and not staked or locked.
• This contrasts sharply with many other altcoins that have complex, often inflationary emission schedules and large upcoming unlocks, creating sell pressure and uncertainty.

Actionable Insight for Crypto AI Investors/Researchers: The clarity, predictability, and deflationary pressure on Hype's supply are significant bullish factors often overlooked in a market rife with complex tokenomics. Investors and researchers should prioritize a deep understanding of token supply dynamics, as predictable and value-accruing models can lead to more reliable valuations and reduced long-term risk. This is especially pertinent for projects aiming to build long-term sustainable decentralized AI ecosystems.

Conclusion

Hyperliquid's unique blend of a high-revenue DEX, a rapidly growing L1 via Hyper EVM, and innovative tokenomics with aggressive buybacks positions it as a standout asset. Investors and researchers should monitor its spot market expansion and Builder Code ecosystem for insights into next-generation decentralized finance infrastructure and platform growth strategies.