Four-dimensional analysis of Hyperliquid fundamentals

Author: Thor Hartvigsen, encryption researcher at On Chain Times; Translated by: Golden Finance xiaozou

1. Preface

Since the launch of HYPE, Hyperliquid has experienced tremendous growth in both trading volume and revenue. HYPE was launched on November 29th at $2 and rose more than 1,400% in less than a month. This article will delve into the fundamentals of Hyperliquid and HYPE, exploring the bullish case for HYPE and its potential valuation given volume and revenue growth in 2025.

2. Transaction volume

Before the release of HYPE, skeptics expected post-airdrop trading volumes to be low, as the past behavior of perpetual decentralized exchanges shows exactly this... greedy capital will move from the highest reward protocol to the next A maximum reward agreement. It is worth noting that since the release of HYPE, Hyperliquid’s trading volume has increased dramatically, hitting a new daily high of more than $10 billion in just one day. In addition to the massive incentives previously given to traders, Hyperliquid is a quality on- chain product that most traders using the platform will recognize.

It’s also worth noting that while the first wave of airdrops accounted for 31% of HYPE’s supply, an estimated 42.81% of the total supply will be used for future token distributions and community rewards. While it can be expected that a portion of these rewards are dedicated to staking incentives and potential rewards centered around the HyperEVM L1 ecosystem, the current transaction volume and/or the possibility of HYPE holders receiving some kind of reward without their knowledge Sex is not absent.

42.81% of the HYPE supply is equivalent to approximately $11 billion (at a price of $25 per HYPE), which is a substantial return and makes Hyperliquid trading even more attractive for perpetual contract traders. However, it is important to note that this is purely speculation.

( 1 ) Hyperliquid vs CEXs (Centralized Exchange)

We have long been tracking Hyperliquid’s trading volume relative to centralized exchanges like Binance. Over time, Hyperliquid's market share will continue to grow as more users and transaction volume move to the chain. Comparing Hyperliquid to Binance, it is clear that Hyperliquid still has a long way to go. However, Hyperliquid’s market share showed a clear upward trend in December, as shown in the chart below. In the past two weeks, Hyperliquid's relative market share has remained around 5-8%. Binance’s recent derivatives daily trading volume ranged from $60 billion to $150 billion, according to data from Coingecko. But since there is no way to actually verify these volume figures from centralized exchanges, they may need to be taken with a grain of salt.

( 2 ) Spot trading volume

As you may already know, Hyperliquid also has a spot token market. Hyperliquid also has a spot token market. Since the launch of HYPE, spot trading volume has increased significantly, and the tokens with the largest trading volume are HYPE, PURR, HFUN and PIP.

Tokens join the Hyperliquid spot market through an auction where the highest bidder can post their ticker. This happens every 31 hours and is currently selling for around $300,000, as shown below. The highest auction price was for GOD on December 16, with bidders paying nearly $1 million.

3. Expenses and benefits

( 1 ) Perps (perpetual trading)

Hyperliquid’s fees are paid by traders on the platform. Fees are kept low compared to other exchanges like Binance to incentivize trading activity. For perpetual futures trading, for most people, the fee for a market order (taker) is 0.035% and the fee for a limit order (maker) is 0.01%. The more you do, the lower your fees will be.

In order to calculate the fees charged by the protocol, the average fees paid by traders (taker vs. maker volume and average fee level) must be calculated. ASXN did a good job analyzing this in its September report, as shown below. From this, the average fee paid is estimated to be 0.01276%, which is a conservative/worst case scenario since market maker rebates are assumed.

Given this average fee value, if Hyperliquid's perpetual futures daily trading volume averaged $5 billion to $10 billion, this would equate to annual fees of $232,870,000 to $465,740,000 (actually, due to conservative assumptions about average fees, actual fees may be higher).

These fees are collected by the HLP Market Making Vault, Insurance Fund, Assistance Fund, and a number of other various addresses on Hyperliquid. The team has not disclosed information about the exact allocation of revenue generated from trading activity fees on the platform, making it difficult to accurately estimate HYPE buybacks.

( 2 ) Spot (spot trading)

The fees traders pay in the spot market are used to purchase and burn the tokens being traded. Not surprisingly, HYPE accounts for the majority of spot trading volume on Hyperliquid. Over 100,000 HYPE ($2.5 million at current prices) has been burned from HYPE’s spot fees so far. From a macro perspective, this has no material impact on the supply of HYPE compared to the bailout fund's buybacks (at least not yet).

( 3 ) Spot auction

Hyperliquid also earns significant revenue from funds paid by winning bidders in spot auctions. At $300,000 per auction, Hyperliquid's annual revenue will increase by $84,774,000. Flo published an excellent analysis article on X, covering Hyperliquid’s revenue under different spot auction prices and daily trading volumes. Based on a spot auction of US$1 million per spot auction and a daily trading volume of US$6 billion, Hyperliquid’s annual revenue is estimated to be US$829.5 million. At a 30x P/E ratio, this would bring HYPE to $74.52 per token.

4. Assistance fund and HYPE repurchase

While it is unclear how revenue from spot auctions and perpetual trading is distributed among the Assistance Fund (AF), Insurance Fund, HLP, and other addresses, we can measure HYPE’s daily repurchases through the Assistance Fund. A few days ago, I published an analysis article on X analyzing the 48-hour HYPE repurchase situation of the aid fund. The situation at that time was that 151,000 HYPE were repurchased within 48 hours, equivalent to an annualized buying pressure of US$686 million. In the past two days, Hyperliquid’s average daily trading volume has reached $8 billion.

In contrast to many other crypto protocols, HYPE derives its value directly from the revenue generated by Hyperliquid.

5. Future prospects

Heading into 2025, bullish HYPE is a bet that growing trading volumes on the Hyperliquid exchange, as well as growing demand for spot auctions, will lead to increased revenue and, in turn, larger HYPE buybacks. One reason Hyperliquid will be used by more and more people is that it also reserves billions of dollars in future bounties, making Hyperliquid a very profitable place to trade. Hyperliquid has a very strong user-focused community, with a lot of thought sharing and a strong narrative surrounding the protocol and HYPE.

With the advent of new features such as staking, perpetual trading token margining, and the application ecosystem that HyperEVM will bring, there will be a lot of potential upside and a lot to look forward to.