The way of Hyperliquid comes (1)

A ghost, a super fluid ghost, wanders around the chain.In order to sacredly encircle this ghost, all the forces of CEX, offshore and onshore, Perp DEX and FTX fragments, Solana’s radicals and L2’s rookies, all united.

The US dollar is the anchor of liquidity. Hyperliquid is equivalent to Crypto liquidity. Trading is increasingly concentrated on mainstream currencies such as BTC/ETH. People deliberately or deliberately forget that Hyperliquid seizes the time window to develop and grow up, and inadvertently grows into a towering tree.

People are talking about the possibility of Hyperliquid Flip Binance. It seems that Aster’s offense is just the beginning of a long offense, but in fact, the 20x leverage limit in 2021 has not ended the competitive situation between FTX and Binance, and today’s Aster 1001x will not hinder Hyperliquid’s pace.

Mystery is the source of charm. The Hyperliquid ecology is too complex. This article only cares about how Hyperliquid survived the CEX encirclement and rebels. As for the genealogy of HyperEVM and its DeFi ecosystem, as well as the capital operation stories of $HYPE’s flywheel, $USDH’s closed loop, ETF and DAT, etc., they will be told in subsequent articles.

Price of time

Don’t hate your enemies, as they will lose your judgment.

How long is the history of finance? The history of arbitrage is as long as it is.

From Coindesk’s disclosure of FTX secrets on November 2, 2022 to FTX’s bankruptcy filing on November 11, 2022, the strategy was to attack the security of $FTT as FTX reserves, and the market maker Alameda misappropriating FTX user assets. Then CZ first stated that it could acquire FTX and then refused, disrupting SBF’s self-rescue rhythm of fundraising.

SBF clearly expressed his anger towards CZ when raising funds in the Middle East, and emotions were the enemy of business, and in the end SBF did not save FTX.

In today’s view, whether it is the prediction market, AI investment, the Solana chain itself, the gradual progress of FTX asset liquidation, or even the collaboration between perpetual contract exchanges and market makers, they will find that SBF’s thinking is correct, but it’s a pity that people are unstable.

Image description: Hyperliquid’s early development history

Image source: @zuoyeweb3

After the FTX collapsed, CZ began to negotiate with the US judicial system to reimburse the ticket. The price of reimbursement of the ticket was $4.2 billion. Unfortunately, the high price did not return to Binance’s stable position, and the seeds of Hyperliquid have been planted.

The United States defines challengers as GDP reaches about 60%, and the Soviet Union and Japan are all like this. Binance’s warning line for challengers is 10%. As long as it is lower than this security line, whether it is dYdX on the chain or centralized FTX, it is a negotiable object. Binance’s main website and ApolloX of the BNB ecosystem can be used to cooperate in defense.

Hyperliquid almost developed at the pace of Binance, and launched from June 2023 to November 2024 to issue coins. Who still remembers that CZ was talking about Bio Protocol and education Giggle at this time. As for Hyperliquid, it is just another coin-issuing Perp project.

Image description: Hyperliquid OI Market Share

Image source: @0xhypeflows

Unfortunately, Hyperliquid’s growth flywheel did not stagnate after $HYPE’s epic airdrop, but instead trading volumes really started to rise.

What is abnormal is that GMX has also seen a surge in trading volume, and the transaction volume has been exchanged for tokens. After issuing the coin, the price and trading volume will return to zero. It can be predicted that whether it is Aster, Avantis, Lighter, Backpack, edgeX, StandX, Drift or BULK, they will follow this path. This does not mean that they are not good projects, nor does it mean that tokens cannot participate.

We are just emphasizing that Hyperliquid can survive after issuing coins. This is an abnormal behavior in itself, so we will examine whether it can travel through the cycle and become a main axis of the crypto industry based on this.

The remaining similar projects will lose their attractiveness after issuing coins. Sushiswap can absorb Uniswap trading volume, GMX can absorb dYdX trading volume, and Blur can absorb OpenSea trading volume.

Binance offshore package Coinbase onshore benefits, Star SBF uses FTX package Binance to be regulated, Hyperliquid package CEX package.

The time window is just passively leaving blank space, and only by actively keeping up with the situation can we have the present.

The centralization of BTC/ETH trading is mirrored by the Meme craze. It is precisely because large funds and ETFs dominate the price trend of mainstream coins that PumpFun is on-chain market. Desperate retail investors will encounter sanctions for disconnecting the network cable through GameStop. Meme will never restrict this at this point.

In mid-2024, Hyperliquid started the Dutch auction coin listing mode. In addition to innovating the opaque coin listing mode of CEX, more importantly, Hyperliquid gradually entered the double-headed parallel mode of spot and contracts.

However, except for $GOD at the end of 2024, the remaining bidding prices hovered at low levels, and the currencies launched in 2024 are basically “non-mainstream” Meme coins, which is incomparable to the current BTC spot trading volume approaching Binance.

Image description: Hyperliquid Dutch shooting data

Image source: @asxn_r

To be more precise, Hyperliquid’s development started with Perp DEX, focusing on routine processes such as low latency, token stimulus, and permissionlessness. However, it followed the launch of Meme Inspur’s auction mechanism, and from then on, it truly entered the spot and “retail investors” minds, and then cultivated a complete trading ecosystem.

The same is true for $USDH, and the same is true for HyperEVM. System Thinker is the true nature of Jeff, the founder of Hyperliquid. You will reuse this methodology at all stages of Hyperliquid’s development.

Image description: Hyperliquid User Growth

Image source: @Hyperliquidx

From the perspective of intuitive user growth, the first 10,000 users accumulated in the internal test in October 2023, but in the S1 season from 2023.11 to 2024.5, the number of Hyperliquid users increased to 120,000.

Among them, the spot model created the second small peak in April/May taken by the Netherlands, and when Meme was the hottest at the end of 2024, $GOD was launched, and $Solv also entered the Hyperliquid spot market, becoming the first mainstream ecological BTCFi project token.

Of course, I cannot quantify the causality of the spot market for Hyperliquid users and transaction volume growth, but the two are highly correlated in time.

Hyperliquid does not simply rely on high leverage and No KYC to gain market position. We must change our stereotypes about Hyperliquid from the beginning.Hyperliquid is an all-round exchange, but it is entered with Perp products..

Liquidity price

As of now, Hyperliquid’s repurchase amount has reached US$1.4 billion.

In November 2024, after the $HYPE airdrop was completed, the main spot transactions were concentrated within itself, but forking was needed at this time because Hyperliquid is no longer just a spot and contract exchange, HyperEVM and in pre-research until early 2025.

To sort it out, Hyperliquid is a bit like Ethereum with one consensus layer + two execution layers. HyperBFT is its consensus layer. The so-called nodes maintain the consensus of HyperBFT, while HyperCore is contract and spot exchange L1, and HyperEVM is open L1 with no permission access.

Through the CoreWriter system, HyperEVM can call and allocate HyperCore liquidity. For example, the LST protocol does not require intermediary of package assets, but can directly reuse the native pledge standard.

In addition, Unit Protocol can bridge external ecological assets to Hyperliquid, while Builder Codes allows any front-end to use HyperCore liquidity and participate in handling fee sharing. Rabby Wallet and Based App are both such front-end access.

The above article introduces that Hyperliquid relies on the passive time window to actively create two supermarkets: spot and contracts, but how to avoid the liquidity split before and after $HYPE is launched is not involved. Here is a complete description.

Let’s first piece together the appearance of the Hyperliquid growth flywheel. Here is the most rational path:

1. S1 and points system, token airdrops in November 2024, 31% (31M) tokens are distributed to S1 and Closed Alpha users. The standard at this time is mainly to examine user contract transaction volume;

2. But be aware that the continued action after the airdrop, the hidden S1.5 and S2.5 are ongoing, and this open and semi-hidden activity gives the Hyperliquid team great flexibility;

3. Hyperliquid claims that 10 people, no VC, focus on community interests, and their handling fees are roughly distributed evenly in HLP (liquidity vault, responsible for liquidation) and repurchase $HYPE, which is also an important source of token price support.

That is, points are relied on before airdrop, and repurchase after airdrop.

Image description: Hyperliquid points system

Image source: @zuoyeweb3

Hyperliquid is very similar to Solana founder Anatoly. Both attach great importance to the market price of tokens and use it as an important indicator to continuously stimulate ecological activity. This is not common. Vitalik cares more about technology and “good” values. Public chains and large projects with VCs are always facing game theory pressure from selling off by all parties.

In fact, it is hard to believe that Hyperliquid has no external funding support at all. Initial market making requires self-operation or third parties to attract real retail investors and institutions. Just look at Aster’s trading volume instantly surpasses Hyperliquid to understand.

The current Hyperliquid nodes and multiple market makers have appeared, such as Infinite Field, Alphaticks, CMI, Flowdex, FalconX, etc., as well as Galaxy, have also become its nodes, plus Paradigm confirmed to buy $HYPE in November 2024.

The most reasonable guess is that market makers participated in Hyperliquid transactions earlier, but unlike the previous VC investments in equity and token segmentation models, market makers gradually purchase tokens from the foundation, which does not violate the character of no VC. MM is indeed not a VC.

For MMs, Hyperliquid’s strong repurchase mechanism can also guarantee their longer-term interests. Hyperliquid can also obtain long-term liquidity support, which breaks the trivial dilemma of falling after issuing coins, and then the token price falls, and the final node is unsubscribed.

According to @Mint_Ventures’ estimate, around $50 million flowed into the Assistance Fund, the repo fund, plus the $40 million given to HLP, the latter can be counted as market making expenses, the former is the overall marketing expenses, and as for VCs and market makers, it is hidden in it and cannot be accurately distinguished.

In addition to market makers, HLP and repurchase mechanisms also contribute to the support of prices, but the final right to use HLP also depends on the Hyperliquid team. In the $JELLYJELLY incident, the team finally decided to use the HLP vault to fill the bad debt of $20 million, but when the $XPL hedging incident was reached, they chose to let the user bear the losses.

But there is good news, Arthur Hayes sold $5M, and DragonFly followed suit to buy $3M.

The agency has not abandoned Hyperliquid, the only debate is how much is $HYPE worth?

The price of leverage

Extend the sales curve and slow down the sales speed.

Interest rate is the speed of money flowing, and price is the difference in valuation between the two parties.

If you briefly compare Hyperliquid income and expenditure, the income includes spot currency fees (Dutch auctions), spot handling fees, contract handling fees, liquidation fees, and Builder Codes’ profit sharing, and the expenditure includes repurchase and destruction.

But it won’t be that simple, otherwise the price of $HYPE will become another representation of trading volume, which should be about 10% of $BNB, that is, $100, but unfortunately it is only $40-50 at present.

Image description: $HYPE Repurchase Price

Image source: @asxn_r

Continuing the previous article, $HYPE repurchase and Ethereum Foundation sales are reflected at the current high point, which does not affect the normal development of the ecosystem, nor does it rely entirely on repurchase to raise prices and create false prosperity. On the other hand, EF, you’d better run away if they take action.

There are three factors that disrupt the system of $HYPE valuation:

1. High control, HYPE’s main spot and contract trading volumes occur in HyperCore, and the foundation controls most of the $HYPE pledge and circulation;

2. Price-to-sales ratio, P/S must be effective in a sufficient trading market. Coinbase and Circle represent the prices of CEX and stablecoins in the US stock market, respectively, but $HYPE can be “manipulated” under high control;

3. The institutional price, the main participation of ETH, DAT, and the intermixing of the staking system and the HyperEVM ecosystem are still in the growth stage and have not experienced the market consensus of the $BNB crossing cycle.

However, P/S can give us an illusion, and false illusions also appear objective through numbers. Let’s just simply calculate P/S and see how far HYPE and $1,000 are:

1. As of now, Hyperliquid’s revenue in 2025 is US$730 million. Assuming that the annual revenue of US$1 billion is more reasonable, the market value is US$15 billion, and the P/S is around 15.

2. Coinbase P/S 11.8, Binance has an annual revenue of approximately US$10 billion, BNB has a market value of US$136 billion, P/S is approximately 13.6, and Robinhood has a current value of 30, which is significantly too high, and it happened to be 11.4 before the Cannes press conference in June.

It is not very accurate to estimate that the P/S of the US stock market of a normal CEX/crypto brokerage firm is around 11, which means that the token price includes 10 times the leverage, which is the discount price of everyone’s imagination space of 10 times.

However, the price of Hyperliquid is “operated” in many ways. The only problem is that Arthur Hayes believes that $HYPE repurchase cannot beat the selling pressure. He predicts that on November 29, it will have 237.8 million $HYPEs that need to be unlocked, creating massive selling pressure, and crushing HYPE’s future, but maintaining the long-term prediction of 126x remains unchanged.

Faced with the end of S2, the Hyperliquid team chose to empower NFT instead of continuing to airdrop tokens directly, which can also be regarded as draining traffic to HyperEVM rather than directly causing $HYPE selling pressure.

$BNB is a reflection of Binance’s unique position in the trading field. It is not enough for Hyperliquid to be the king in the Perp DEX field. You need to defeat Binance to maintain $HYPE at a high level. Once the market fluctuates violently or turns bearish, the huge buying will turn into selling pressure in reverse. UST is not Bitcoin, and $HYPE may not be $BNB.

Either the next Binance living or the next dead FTX.

Conclusion

Sow the seeds of the light breeze and leave them to the storm for future generations.

Hyperliquid did not surpass the times, but seized the rare window of time and gave the strongest synergy effect from the market combination. The same was true for the early Midjourney. Hyperliquid truly promoted Perp to the retail market, the daily use of DeFi OG chain, the experimental field of institutions, and the hunting ground of giant whales.

Let go and start Meme and seize the opportunity to strengthen yourself.

After growing, Hyperliquid did not choose to enter the sell-off mode, but maintained it as much as possible$HYPEThe price is in the medium range, it must be noted that it took BNB to 1,000 USD. Binance spent 8 years, 3 years of Hyperliquid, and 2 years of $HYPE to catch up.