Overview of Hyperliquid: Product Status, Economic Model, and Valuation

Author: Mint Ventures

1. Introduction

Hyperliquid is arguably the biggest highlight in the recent crypto market, aside from AI and memes. Its strategy of not accepting VC investments, allocating 70% of tokens to the community, and returning all revenue to platform users has attracted market attention. The strategy of using its revenue to buy back HYPE has caused HYPE's circulating market cap to quickly surpass UNI, placing it among the top 25 cryptocurrencies, while also causing its platform business data to soar across the board.

This article aims to describe the current state of Hyperliquid's development, analyze its economic model, and evaluate the current valuation of HYPE, providing an answer to the question of whether "HYPE is expensive or not."

This article reflects the author's thoughts as of the time of publication, which may change in the future. The views expressed are highly subjective and may contain errors in facts, data, or reasoning. Criticism and further discussion from peers and readers are welcome, but this article does not constitute any investment advice.

*Much of the content in this article references the * Hyperliquid Research Report * published by ASXN in September, which is the most comprehensive and in-depth Hyperliquid report I have read. If readers want to learn more about the mechanisms of Hyperliquid, they can refer to this report.*

The following is the main text.

2. Overview of Hyperliquid's Business

Hyperliquid's current business mainly consists of two parts: derivatives exchange and spot exchange. They also plan to launch a universal EVM—HyperEVM in the future. Hyperliquid Architecture Source: ASXN

2.1 Derivatives Exchange

The derivatives exchange is the first product launched by Hyperliquid and serves as its flagship product, occupying a core position in its entire product ecosystem.

In terms of the core product mechanism for derivatives, Hyperliquid has not adopted other innovative product logic (such as GMX, SNX, etc.) due to on-chain performance bottlenecks, but has instead chosen the Central Limit Order Book (CLOB) mechanism, which is the most widely used by various exchanges globally and is the most familiar mechanism for all trading users and market makers, while also focusing on performance.

Their decentralized derivatives exchange operates on Hyperliquid L1, which is a PoS chain composed of a consensus layer (HyperBFT) and an execution layer (RustVM).

HyperBFT is a modified consensus algorithm based on LibraBFT developed by the Meta pre-blockchain team, capable of supporting up to 2 million TPS. With strong performance support at the underlying level, Hyperliquid has put core components of derivatives exchanges, such as order books and clearing houses, on-chain, ultimately forming its decentralized derivatives exchange architecture.

For end users, the experience on Hyperliquid is almost identical to centralized exchanges like Binance, not only in terms of trading experience and product structure but also in trading fees and discount rules. The only difference from centralized exchanges is that Hyperliquid does not require KYC. Hyperliquid's Fee Structure

In addition to trading products, Hyperliquid has provided a Vault function since the establishment of the product. The Vault is similar to "copy trading" in centralized exchanges, where anyone can invest funds into any Vault, managed by the Vault operator, who will invest the funds. 10% of the profits will be allocated to the Vault operator, and to maintain alignment of interests, the operator must hold at least 5% of the Vault. Source: Hyperliquid Official Website

However, based on the current TVL, 95% of the TVL is in the official Vault HLP.

Unlike general Vaults, HLP, being the official Vault, effectively acts as a counterparty for a significant amount of trading on the platform, allowing HLP to earn a portion of various platform fees (trading fees, funding fees, liquidation fees). From this perspective, HLP is somewhat similar to GMX's GLP, with the distinction that GLP acts as a counterparty for all trades on the platform, with a passive and public strategy; whereas HLP's strategy is non-public, and the counterparty for user trades could be either HLP or other users, with HLP's strategy also subject to adjustment at any time.

Since its launch in July 2023, HLP has maintained a net short position, providing liquidity for retail trading, and has remained profitable with a net short position during the long bull market. Currently, the TVL is $350 million, with a PNL of $50 million. From the overall PNL curve of HLP and the PNL of three strategy addresses, it can be seen that the Hyperliquid team is using fees to maintain a relatively positive APR for HLP. Source: Hyperliquid Official Website

In terms of trading volume and open interest, Hyperliquid has been developing rapidly, especially in the last two months. With the $HYPE airdrop and continuous price increases, various platform metrics reached their peak between December 17-20. Hyperliquid's trading volume, open interest, and number of traders since 2024 Source: Hyperliquid Official Website

In the decentralized derivatives market, Hyperliquid has held a leading position in trading volume since June this year, and the gap between Hyperliquid and other decentralized derivatives exchanges has further widened in the last two months, now reaching an order of magnitude difference. Decentralized derivatives exchange trading volume share Source: Dune Decentralized derivatives exchanges ranked by 7-day trading volume Source: DeFiLlama

From the perspective of valuation and trading volume, Hyperliquid is currently more appropriately compared to centralized exchanges. Screenshot Date: December 28, 2024 Source: Coingecko

Hyperliquid's recent data has shown a significant decline (with a peak single-day trading volume of $10.4 billion, and recent daily trading volumes below $5 billion), but its open interest still accounts for 10% of Binance, and trading volume is about 6% of Binance; open interest and trading volume are roughly equivalent to 15% of Bitget and Bybit. At its peak (December 17-20), Hyperliquid's open interest reached 12% of Binance, and trading volume reached 9%; both open interest and trading volume data were close to 20% of Bybit and Bitget.

Overall, Hyperliquid's derivatives exchange is developing rapidly, having established a relatively solid leading advantage in the decentralized derivatives exchange space, and the gap compared to leading centralized exchanges has narrowed to within tenfold.

2.2 Spot Exchange

Hyperliquid's spot exchange also operates in an order book format, with consistent product architecture and fee standards as the derivatives exchange.

Currently, Hyperliquid's spot exchange only lists native assets that meet the HIP-1 standard and does not list tokens from other chains. Hyperliquid's currently top-ranked spot tokens

HIP-1 (Decentralized Token Listing)

HIP-1 is similar to ERC-20 or SPL-20, serving as the token standard for the Hyperliquid network. However, unlike ERC-20 and SPL-20, the cost of creating a HIP-1 token is quite high, as the successful creation of a HIP-1 token also means eligibility for listing on Hyperliquid's spot exchange.

Hyperliquid's HIP-1 is conducted publicly through a Dutch auction, specifically:

Anyone can participate in the auction, with the initial price set at twice the last auction's closing price, and it linearly decreases to $10,000 over 31 hours (this value is adjustable, previously lower, recently adjusted to $10,000). The first developer to successfully bid will gain the right to create a TICKER, which can be listed on Hyperliquid's spot exchange, with the auction amount paid in USDC.

Recent auction and closing prices: Source: ASXN

Notable created Tickers (in descending order of auction amount) include:

GOD : A game invested by Pantera

CREAM : A well-known lending project troubled by hackers, associated with Machibigbrother

ANIME: The token ticker for Azuki, rumored to be acquired by the AZUKI team, but not yet officially confirmed

MON : Issuer of the game Pixelmoon

SWELL : A staking re-staking protocol in the Ethereum ecosystem

RIFT : A game protocol based on Virtual, J3ff

GAME: Rumored to be acquired based on Virtual, but not yet officially confirmed

ANZ : A stablecoin protocol on the base chain

SOVRN : Formerly BreederDAO (a game asset platform invested by a16z and Delphi in the last cycle), set to release a game on Hyperliquid

FARM : Hyperliquid's native AI pet game, launched through the Hyperfun platform

ETHC : A mining project associated with Machibigbrother

SOLV : A Bitcoin ecosystem staking protocol, with investment from BN labs, currently without a token.

SOLV can be seen as a dividing line for HIP-1 auctions; previously, it was mainly meme and domain logic, with tickers often having symbolic significance, and the focus of speculation being the uniqueness within the ecosystem.

After SOLV, most projects are vying for ecological positions and listing qualifications, with prices gradually rising, the highest being GOD, which fetched nearly $1 million. The projects are primarily focused on entertainment, with games and NFTs making up the majority, but there are also DeFi projects like Solv, Swell, and Cream.

Additionally, as an exchange, Hyperliquid's recent spot "listing fee" has stabilized above $100,000, which is already comparable to the listing fees of some second-tier centralized exchanges.

Through HIP-1, Hyperliquid has established a public "decentralized listing" mechanism, where the listing fees are determined by market participants, avoiding the issues faced by centralized exchanges. On the other hand, the collected listing fees will be used for HYPE buybacks and burns, which is beneficial for HYPE's price performance and valuation metrics.

HIP-2 (Hyperliquid's AMM)

Since Hyperliquid's spot trading operates in an order book format, it is challenging to guarantee liquidity for new tokens. Hyperliquid has proposed HIP-2 to address the initial liquidity issue for tokens created through HIP-1.

In simple terms, HIP-2 provides an automated market-making system that allows developers to automatically market-make for tokens generated through HIP-1. The market-making logic is linear within a specified range, with developers setting the upper and lower price limits for the market-making range, as well as the buy-sell boundary. The system automatically market-makes at every 0.3% price change.

The following images show an order book using HIP-2 and its parameter settings:

Since the launch of HIP-2, many newly created Hyperliquid ecosystem tokens have chosen to use this Hyperliquid AMM mechanism. Currently, the total USDC amount for HIP-2 has exceeded $25 million.

Hyperliquid's average daily spot trading volume in the last 30 days is around $400 million, ranking it among the top ten DEXs, with trading volumes comparable to Curve, Lifinity, and Orca. Source: DeFillama

2.3 HyperEVM

HyperEVM has not yet been launched. In Hyperliquid's official documentation, the current derivatives and spot exchanges running on RustVM are referred to as Hyperliquid L1, while HyperEVM is referred to as EVM. According to the definitions in its official documentation, HyperEVM is not an independent chain:

Hyperliquid L1 has a general EVM as part of the blockchain state. Importantly, HyperEVM is not an independent chain but is secured by the same HyperBFT consensus mechanism as other parts of L1. This allows the EVM to interact directly with L1's native components, such as the spot and perpetual order books.

The ASXN report describes Hyperliquid's architecture as follows:

Hyperliquid operates two execution layers (RustVM and HyperEVM) on a consensus layer (HyperBFT), with its core functions for contracts and spot trading hosted on RustVM, while RustVM will focus on these two core dApps, with other dApps hosted on HyperEVM.

Regarding HyperEVM, we know from the team's documentation that:

• Unlike RustVM, which is currently used for Hyperliquid's spot and exchange, HyperEVM is permissionless, meaning any developer can develop applications and issue assets (FT or NFT) on it.
• HyperEVM is interoperable with Hyperliquid's L1, such as L1's oracles being available for HyperEVM, and transfers of certain tokens can also be interchanged between the two VMs. (Not all can be interchanged, as assets on L1 are "permissioned," only including USDC and assets generated through HIP-1, while HyperEVM's assets are much more diverse.)
• HyperEVM will use Hyperliquid's native token $HYPE as Gas, while Hyperliquid's current L1 does not require users to pay Gas.

I have not seen a similar product architecture in the crypto world before, and we are still unclear how typical cases of DeFi composability on Ethereum, such as "depositing ETH into Lido to obtain stETH, then depositing stETH into Aave to borrow USDC, and then using USDC to buy the meme token PEPE," will be realized on HyperEVM and Hyperliquid L1 (this may define whether it is one chain or two). However, in my current understanding, the relationship between HyperEVM and Hyperliquid L1 may be more akin to "an L2 with certain interoperability and an L1," or the relationship between a centralized exchange and its exchange EVM chain (like Binance and BNB Chain or Coinbase and Base Chain).

Currently, the HyperEVM testnet is running normally, with many validators starting to participate in HyperEVM testnet validation, including well-known names like Chorus One, Figment, B Harvest, Nansen, etc. HyperEVM Testnet Validator Node List Source: ASXN

Since RustVM is not open to all developers, there are currently few applications developed based on Hyperliquid's RustVM, mostly trading auxiliary tools:

Such as the Telegram trading bot Hyperfun (token HFUN), the Telegram social trading bot pvp.trade, trading terminals tealstreet and Insilico, and the derivatives trading aggregator Ragetrade, etc.

HyperEVM, being open to all developers, has many projects planned for launch on HyperEVM. In addition to the previously mentioned projects that successfully obtained HIP-1 tokens, the following image and the Hypurr.co website list a considerable number of them.

The specific mechanisms of HyperEVM and its relationship with Hyperliquid L1 remain to be seen once it officially launches. Currently, the official timeline for HyperEVM's launch has not been provided.

In summary: Hyperliquid's overall business positioning is similar to that of leading trading groups, with its core business being trading + L1 operations, making it a direct competitor to major trading groups. Although the business model is consistent, what sets Hyperliquid apart from existing leading trading groups is its choice to build its trading business on-chain. Compared to permissioned and opaque CEXs, Hyperliquid's trading platform advantages include permissionless access (no KYC required), transparent and verifiable business data, better composability, and lower overall operating costs, which also enables it to allocate more revenue and profits to its token HYPE.

3. Hyperliquid Team, Token Economic Model, and Valuation

3.1 Team

Hyperliquid has two co-founders, Jeff Yan and iliensinc , who are alumni of Harvard University. Before entering the crypto industry, Jeff worked at Google and Hudson River Trading. The Hyperliquid team is quite lean; according to ASXN's report from September, there are a total of 10 team members, of which 5 are engineers, which is particularly notable for a derivatives exchange with daily trading volumes exceeding $10 billion.

From the process of building the entire product by the Hyperliquid team, especially their insistence on self-funding RD, building a high-performance chain to achieve a fully on-chain order book, and the highly innovative HIP-1, it is impressive that despite being a lean team, they consistently solve problems based on first principles.

3.2 $HYPE Economic Model

The total supply of $HYPE is 1 billion tokens, officially launched on November 29, 2024. Since there was no financing, there are no investor shares, with the specific allocation as follows:

• 31.0% Genesis distribution, airdropped to early users of Hyperliquid based on points , fully circulating.
• 38.888% for future emissions and community rewards
• 23.8% allocated to the team, with a 1-year lock-up before starting to release, most of which will be released between 2027-2028, with some continuing to be released after 2028
• 6.0% Hyper Foundation
• 0.3% community grants
• 0.012% HIP-2

The team and community are allocated in a 3:7 ratio. The current distribution of holding addresses is as follows:

Excluding community addresses, team addresses, and foundation addresses, the address holding the most tokens currently is the Assistance Fund (AF), holding 1.16% of the total HYPE supply, which is 3.74% of the circulating supply.

Currently, the parts of the entire Hyperliquid ecosystem that involve fees are twofold: trading fees and HIP-1 auction fees. Trading fees include spot and contract trading fees, contract funding fees, and contract liquidation fees. Since Hyperliquid L1 does not charge users gas fees, and HyperEVM has not yet launched, Hyperliquid's current revenue does not include trading gas fees.

According to the team's statements in the documentation:

On most other protocols, the team or insiders are the main beneficiaries of fees. On Hyperliquid, fees are entirely directed to the community (HLP and the assistance fund). For security, the assistance fund holds a majority of its assets in HYPE, which is the most liquid native asset on the Hyperliquid L1.

In most other protocols, the team or insiders are the main beneficiaries of fees. On Hyperliquid, fees are entirely directed to the community (HLP and the assistance fund). The assistance fund holds a majority of its assets in HYPE, as this is the most liquid native asset on Hyperliquid L1.

All fees are allocated to HLP and AF. However, the team has not explicitly disclosed the ratio of fees between HLP and AF.

Fortunately, the data on Hyperliquid L1 is publicly accessible. According to @stevenyuntcap 's speculation , as of early December, Hyperliquid has subsidized HLP with $44 million since its launch, while the initial AF used to purchase HYPE was $52 million. It can be concluded that Hyperliquid's cumulative revenue from its launch to early December is $96 million, with the distribution ratio of total protocol revenue between HLP and AF being 46%:54%. (Additionally, we can calculate that Hyperliquid's cumulative trading volume during this period was $428 billion, resulting in an average contract fee rate of about 0.0225%.)

Since all of AF's USDC has been used to buy back HYPE, we can simplify it to say that 46% of Hyperliquid's perpetual contract trading revenue during this period has been allocated to the supply side (HLP holders), and 54% has been used for the buyback of $HYPE tokens.

Of course, in addition to perpetual contract trading fees, Hyperliquid will also have two additional sources of revenue that will benefit HYPE holders: auction fees from HIP-1 and a portion of USDC from spot trading fees. Currently, these two sources of revenue are also entirely directed to AF for HYPE buybacks (this also includes the HYPE portion of the HYPE-USDC spot trading fees, which is currently directly burned, with a cumulative burn of 110,000 HYPE tokens).

Currently, AF's strategy remains to periodically purchase HYPE with all accumulated USDC, allowing us to simplify tracking Hyperliquid's profit situation and the intensity of buybacks for HYPE based on AF's USDC inflow data. According to hyperdata.info, AF's cumulative USDC inflow has exceeded $77 million, with over $25 million in the last month, averaging about $1 million in daily buybacks of HYPE.

On December 30, 2024, Hyperliquid officially launched the HYPE staking feature, with the current yield for HYPE staking at around 2.5%. This yield only includes fixed PoS consensus layer earnings, with the yield consensus referencing the yield consensus of Ethereum's consensus layer (the yield is inversely proportional to the square of the amount of staked HYPE). Currently, aside from the 300 million tokens held by the team and foundation, nearly 30 million user tokens are also participating in staking.

Looking ahead, there are still many potential adjustments to HYPE's economic model, such as:

• The launch of HyperEVM,
• $HYPE used as gas for HyperEVM
• Distribution of execution layer earnings to HYPE stakers (currently, HYPE staking earnings only include)
• Redistribution of fees to $HYPE holders
• Discounts on $HYPE staking fees

3.3 Valuation

Next, we will explore two valuation frameworks for Hyperliquid. Before we begin, it is important to note:

• Hyperliquid's data is highly volatile—its market cap, TVL, revenue, user data, etc., have seen several-fold or even ten-fold increases in the past month, followed by a 50% pullback. The volatility of its indicators far exceeds the comparisons shown by the valuation metrics listed below. The following valuation frameworks are more suitable for long-term reference.
• The price of HYPE is currently Hyperliquid's biggest fundamental factor, and the surge in various metrics is more a result of the rise in HYPE's price, rather than "because Hyperliquid has such good data, it has such a price."

Framework 1: Comparison with BNB

Hyperliquid's main thesis is the "on-chain Binance" proposed by Messari:

This analogy is generally reasonable and may indeed be a good framework, as Binance/BNB is likely the most suitable comparison for Hyperliquid/HYPE.

• Hyperliquid's core business is derivatives and spot exchanges, which aligns with Binance's main business.
• HyperEVM can be compared to BNBChain; although HyperEVM has not yet launched, based on current design, both HYPE and BNB can be used as gas for EVM chains and can be staked for rewards.
• Both HYPE and BNB can directly benefit from platform trading fees;

Now, we will compare Hyperliquid's architecture with Binance, dividing it into derivatives exchange, spot exchange, and EVM.

• Derivatives Exchange:

As mentioned earlier, Hyperliquid's open interest and trading volume data are around 10% of Binance's corresponding data, so we roughly estimate that in the derivatives exchange module, HYPE = 10% BNB.

• Spot Exchange:

Hyperliquid's average daily spot trading volume in the last thirty days is around $400 million, while Binance's average daily trading volume is about $26 billion, excluding the fee-free FDUSD trading pairs, so HYPE = 1.5% BNB.

• EVM:

Following the logic above, we believe the relationship between HyperEVM and Hyperliquid L1 is more similar to that between Binance exchange and BNBChain.

HyperEVM has not launched yet, so we cannot confirm how much TVL will migrate from RustVM to HyperEVM. However, based on product architecture and corresponding experience, the overall logic still relies on migrating existing users from the exchange. We list the data for Binance and Coinbase, and considering the market's enthusiasm for HYPE, we assume that 10% of Exchange TVL will migrate to the chain (still optimistic, but most articles using TVL for valuation currently assume that 100% of Hyperliquid TVL will migrate to HyperEVM). Based on this calculation, HYPE = 3% BNB.

• Economic Model

Additionally, we need to consider the differences in the economic models of HYPE and BNB.

From the analysis of HYPE's economic model above, it can be seen that currently, HYPE converts 54% of the platform's gross profit and 100% of the net profit into buybacks or burns for HYPE.

BNB previously allocated 20% of Binance's net profit for BNB buybacks according to its white paper. After decoupling buybacks from the platform's net profit in 2021, we have no way of knowing the proportion of Binance's net profit that empowers BNB. However, based on the trend of burn data and Binance's market position during the same period, the proportion of net profit burns has likely remained at a similar level.

From the perspective of (benefits to holders) economic models, HYPE significantly outperforms BNB. BNB historical burn data Source

Additionally, it is worth mentioning that the proportion of Hyperliquid's revenue flowing to HYPE tokens is currently 54%, and this value still has room for further increase. Due to mechanism reasons, HLP has held a large number of cryptocurrency short positions collateralized by USDC during the bull market, where BTC has increased over 200% from July 2023 to now. Although HLP's strategy has been effective in maintaining a break-even point, it still incurs an annualized APR of over 30% to retain funds within HLP. HLP historical net positions Source: Hyperliquid Official Website

In the future, as the market gradually peaks, the overall trend of crypto users as net long positions in derivatives will not change. The probability of HLP's strategy earnings increasing in a volatile or bear market will rise (we can see a similar trend from the historical earnings of GMX's GLP and GNS's Vault). Hyperliquid may not need to allocate such a large proportion of its revenue as rent payments to HLP, and Hyperliquid's net profit margin is still expected to improve further.

Speaking of net profit margins, we do not know the specific net profit margin of Binance. However, we can glean some insights into the operating costs of centralized exchanges from the quarterly reports of the publicly listed company Coinbase. Coinbase quarterly report Q3 2024

It can be seen that in 2023, Coinbase's operating expenses (RD, management, sales expenses, and transfer fees) averaged over $600 million per quarter, which is roughly equivalent to all revenue, with a net profit margin close to 0; in 2024, as the market exploded, its net profit margin improved significantly, but it still fell short of 30%.

From the above numerical comparisons, we can clearly see Hyperliquid's net profit margin (economic model) advantages compared to centralized trading. We can also look at a specific event: the handling of listing issues to see this advantage in detail.

Centralized exchanges typically have a dedicated listing team responsible for tracking market trends and negotiating with various project teams to collect listing fees and/or project tokens. Centralized exchanges need to pay substantial salaries and commissions to the listing team, as well as salaries for the internal control team that monitors potential conflicts of interest during the listing process.

In contrast, Hyperliquid's listing process, HIP-1, as previously described, operates automatically through pre-defined code, making the operational costs of new listings approach zero, allowing its revenue from "listing fees" to be fully allocated to HYPE holders.

In summary, as of the end of December 2024, we have the following comparisons:

Derivatives Trading: HYPE = 10% BNB

Spot Trading: HYPE = 1.5% BNB

EVM (estimated): HYPE = 3% BNB

Economic Model: HYPE significantly outperforms BNB

Circulating Market Cap: HYPE = 9% BNB

Fully Circulating Market Cap: HYPE = 27% BNB

Derivatives trading is currently Hyperliquid's primary business, and it should carry a relatively high weight in the valuation comparison. In my view, while HYPE's current market cap cannot be considered cheap, it is also not overly expensive.

Framework 2: P/S

HYPE has a token buyback and burn mechanism that directly affects the HYPE token, allowing for the use of the P/S metric for valuation, as follows:

• Contract Trading Fees:

We estimate based on an average contract trading fee of 0.0225% and a profit distribution ratio of 46:54 between HLP and AF.

In the last month, Hyperliquid's contract revenue = $154.7 billion * 0.0225% = $34.8 million, of which about 54% goes to AF for HYPE buybacks, resulting in a buyback amount of $18.79 million, corresponding to an annualized net profit of $225.5 million.

• HIP-1 Auction Fees:

In the last month, revenue was $6.1 million, with the distribution ratio of HLP and AF being 46:54, this portion corresponds to an annualized net profit of $39.5 million.

• Spot Trading Fees:

Hyperliquid's spot trading fee structure is the same as that of contract trading, and the distribution method for the USDC portion of the fees is also the same as that of contract trading, meaning profits are distributed between HLP and AF at a ratio of 46:54; the fees from other tokens in spot trading (for example, in HYPE-USDC trading, the HYPE buyer pays USDC fees, and the HYPE seller pays HYPE fees) are directly burned.

Thus, we need to calculate the net profit from spot trading fees for HYPE in two parts:

HYPE portion: This can be directly queried through the block explorer. The HYPE token TGE has just completed 30 days, with a total of 110,490 HYPE tokens burned, corresponding to an annualized burn of 1,325,880 tokens, valued at approximately $37 million at the current price.

USDC portion: In the last 30 days, Hyperliquid's spot trading volume was $11.5 billion, and the portion used for HYPE buybacks in spot trading = $11.5 billion * 0.0225 * 54% = $1.397 million, corresponding to an annualized net profit of $16.77 million.

Combining the above three fee components, we can annualize based on the most recent month's data, resulting in a total amount directed towards HYPE buybacks of $318.77 million.

Based on the circulating market cap, HYPE's P/S is 29.4, and based on the fully circulating market cap, HYPE's P/S is 88.

We have listed some comparable crypto projects with certain similarities to Hyperliquid's circulating P/S metrics:

It can be seen that the P/S valuation of L1 is significantly higher than that of applications, while Hyperliquid's P/S valuation is significantly lower than that of comparable other L1s.

The above presents two frameworks for valuing HYPE, and it is important to remind once again:

• Hyperliquid's data is highly volatile—its market cap, TVL, revenue, user data, etc., have seen several-fold or even ten-fold increases in the past month, followed by a 50% pullback. The volatility of its indicators far exceeds the comparisons shown by the valuation metrics listed below. The above valuation frameworks are more suitable for long-term reference.
• The price of HYPE is currently Hyperliquid's biggest fundamental factor, and the surge in various metrics is more a result of the rise in HYPE's price, rather than "because Hyperliquid has such good data, it has such a price."

4. Risks

Hyperliquid faces the following risks:

• Financial risk: Currently, all of Hyperliquid's funds are stored in its bridge on the Arbitrum network. The security of this smart contract and the safety of the 3/4 team multi-signature managing all funds are crucial.
• Code risk: This includes the current L1 risks and HyperEVM risks. Hyperliquid employs an innovative architecture and consensus, and its current non-open-source status reduces the likelihood of attacks. However, as Hyperliquid's scale and influence grow, and with the launch of HyperEVM, the potential for attacks or code vulnerabilities may gradually increase.
• Oracle risk: This is an inherent risk for all derivatives exchanges.
• Regulatory risks leading to a loss of comparative advantage: The lack of KYC is currently Hyperliquid's main comparative advantage over centralized exchanges. As Hyperliquid continues to grow, there may be regulatory requirements related to anti-money laundering and other compliance issues.

References:

https://hyperfnd.medium.com/hype-genesis-1830a4dc2e3f

https://newsletter.asxn.xyz/p/hyperliquid-the-hyperoptimized-ord

https://data.asxn.xyz/dashboard/hl-auctions

https://hypurrscan.io/stats

https://hypurrscan.io/token/0x0d01dc56dcaaca66ad901c959b4011ec

https://www.hypeburn.fun/

https://www.prestolabs.io/research/hyperliquid-the-hype-begins#4.1-Decentralization

https://x.com/0xak_/status/1871051318267445562

https://x.com/Darrenlautf/status/1869961681671184629

https://x.com/stevenyuntcap/status/1863643385002652044

https://hyperdata.info/