Introduction

Since the launch of Hyperliquid, both the trading volume and revenue of HYPE have seen significant growth. HYPE was listed at $2 on November 29 and, in less than a month, its price surged by over 1400%. This article will delve into the fundamentals of Hyperliquid and HYPE, explore the bullish reasons for HYPE, and discuss potential valuations given the expected growth in trading volume and revenue by 2025.

Trading Volume

Prior to the release of HYPE, many were skeptical about the trading volume following the airdrop, believing that the historical performance of perpetual decentralized exchanges indicated low trading volumes, as capital typically shifts to new protocols offering the highest rewards. However, since the launch of HYPE, trading volume on Hyperliquid has significantly increased, with daily trading volumes reaching record highs of over $10 billion. In addition to the generous incentives provided to traders, Hyperliquid is viewed by most users of the platform as a high-quality on-chain product.

It is also noteworthy that although the first wave of airdrops accounted for 31% of the total HYPE supply, an estimated 42.81% of the supply is expected to be allocated for future token distribution and community rewards. While some of these rewards may focus on staking incentives and potential yields centered around the HyperEVM L1 ecosystem, the current trading volume still presents the possibility for HYPE holders to receive rewards without prior knowledge.

The 42.81% of HYPE supply amounts to approximately $11 billion (based on a valuation of $25 per HYPE), making Hyperliquid even more attractive to perpetual contract traders. However, this remains purely speculative.

(1) Hyperliquid vs. CEXs (Centralized Exchanges)

We have been monitoring the trading volume comparison between Hyperliquid and centralized exchanges like Binance. As more users and trading volume shift on-chain, Hyperliquid's market share is expected to gradually rise. Although there is currently a gap between Hyperliquid and Binance, the market share for Hyperliquid saw a significant increase in December. Over the past two weeks, Hyperliquid’s relative market share has maintained a range of approximately 5% to 8%. According to Coingecko, Binance's recent daily trading volume for derivatives has ranged between $60 billion and $150 billion, but one should approach these figures with caution as they cannot be verified from centralized exchanges.

(2) Spot Trading Volume

In addition, Hyperliquid also features a spot token market. Since the launch of HYPE, spot trading volume has significantly increased, with the most traded tokens including HYPE, PURR, HFUN, and PIP.

Tokens are added to Hyperliquid's spot market through an auction process, where the highest bidder gains the right to launch their ticker. This auction takes place every 31 hours, with the current starting bid set at approximately $300,000. Notably, during the GOD token auction on December 16, bids reached nearly $1 million.

Fees and Revenue

(1) Perpetual Trading (Perps)

On the Hyperliquid platform, traders bear the transaction fees, which are relatively low and more incentivizing for trading activities compared to other exchanges like Binance. For perpetual futures trading, the fees for most market orders (takers) are 0.035%, while the fees for limit orders (makers) are 0.01%. The larger the trading volume, the lower the fees paid.

To estimate the fees collected by the protocol, it is necessary to calculate the average fees paid by traders, which includes the trading volume and average fee levels for both takers and makers. ASXN provided a detailed analysis in its September report, indicating that the average fee paid is approximately 0.01276%. This figure is a conservative estimate, as it assumes the existence of rebates for market makers.

Considering this average fee, if Hyperliquid's daily trading volume for perpetual futures averages between $5 billion and $10 billion, the annual fees could reach between $232,870,000 and $465,740,000. In reality, due to the conservative assumptions, the actual fees may be higher.

These fees will be allocated to various addresses, including the HLP liquidity pool, insurance fund, and assistance fund. Since the team has not disclosed the specific allocation of trading activity fees, it is challenging to accurately assess the buyback situation for HYPE.

(2) Spot Trading

In the spot market, the fees paid by traders are primarily used to purchase and burn transaction tokens. As the main token for spot trading volume on Hyperliquid, HYPE naturally accounts for a significant portion of this. Currently, over 100,000 HYPE has been burned from spot trading fees, estimated at $2.5 million based on current prices. From a macro perspective, this has little impact on HYPE's total supply, at least for now.

(3) Spot Auctions

Hyperliquid also generates substantial revenue from the fees paid by winning bidders in the spot auctions. Assuming a bid of $300,000 per auction, Hyperliquid's annual revenue could increase to $84,774,000. A user named Flo recently posted an insightful analysis on X, exploring Hyperliquid's revenue under different auction prices and daily trading volumes. If each spot auction amounted to $1 million and daily trading volume reached $6 billion, Hyperliquid's annual revenue could be projected at $829.5 million. At a price-to-earnings ratio of 30, this would value HYPE at $74.52 per token.

Assistance Fund and HYPE Buybacks

While it is currently unclear how the revenue from spot auctions and perpetual trading is distributed among the Assistance Fund (AF), insurance fund, HLP, and other addresses, we can assess HYPE's daily buyback situation through the Assistance Fund. A few days ago, I published a post on X analyzing the HYPE buyback situation from the Assistance Fund over a 48-hour period. The data showed that 151,000 HYPE were repurchased during this time, resulting in an annualized buying pressure of $686 million. In recent days, Hyperliquid's daily average trading volume has reached $8 billion.

Compared to many other crypto protocols, HYPE can directly benefit from the revenue generated by Hyperliquid.

Conclusion

Looking ahead to 2025, the bullish potential of HYPE primarily stems from the continued growth in trading volume on the Hyperliquid exchange and the increasing demand for spot auctions, which will drive revenue and, consequently, HYPE buybacks. Hyperliquid is attracting more users due to its allocation of billions of dollars in future rewards, making it a very profitable trading venue. Furthermore, Hyperliquid has fostered a strong user community around the protocol and HYPE, where members actively share ideas and engage in discussions.

With the introduction of new features such as staking, perpetual trading token margins, and the application ecosystem brought by HyperEVM, many potential positive factors are worth anticipating in the future.

Risk Warning

While the cryptocurrency market offers significant growth potential and innovation opportunities, it also carries a high level of market risk and price volatility. The value of crypto assets can fluctuate dramatically in a short period, potentially leading to substantial financial losses for investors. Additionally, the cryptocurrency market faces multiple risk factors, including technical risks, legal and regulatory uncertainties, cybersecurity threats, and market manipulation. We strongly advise users to conduct thorough research and due diligence before making any investment decisions and to consult professional financial advisors. All investment decisions are made at the user’s own risk. Thank you for your trust and support of Venkate!

Building The Future of Crypto Exchange

Where Meet a Confluence of Inspiration and Innovation

Venkate Exchange is an innovative cryptocurrency trading platform, drawing its name and inspiration from Venkateswara—a deity symbolizing wealth and prosperity in Indian mythology.

Introduction

Since the launch of Hyperliquid, both the trading volume and revenue of HYPE have seen significant growth. HYPE was listed at $2 on November 29 and, in less than a month, its price surged by over 1400%. This article will delve into the fundamentals of Hyperliquid and HYPE, explore the bullish reasons for HYPE, and discuss potential valuations given the expected growth in trading volume and revenue by 2025.

Trading Volume

Prior to the release of HYPE, many were skeptical about the trading volume following the airdrop, believing that the historical performance of perpetual decentralized exchanges indicated low trading volumes, as capital typically shifts to new protocols offering the highest rewards. However, since the launch of HYPE, trading volume on Hyperliquid has significantly increased, with daily trading volumes reaching record highs of over $10 billion. In addition to the generous incentives provided to traders, Hyperliquid is viewed by most users of the platform as a high-quality on-chain product.

It is also noteworthy that although the first wave of airdrops accounted for 31% of the total HYPE supply, an estimated 42.81% of the supply is expected to be allocated for future token distribution and community rewards. While some of these rewards may focus on staking incentives and potential yields centered around the HyperEVM L1 ecosystem, the current trading volume still presents the possibility for HYPE holders to receive rewards without prior knowledge.

The 42.81% of HYPE supply amounts to approximately $11 billion (based on a valuation of $25 per HYPE), making Hyperliquid even more attractive to perpetual contract traders. However, this remains purely speculative.

(1) Hyperliquid vs. CEXs (Centralized Exchanges)

We have been monitoring the trading volume comparison between Hyperliquid and centralized exchanges like Binance. As more users and trading volume shift on-chain, Hyperliquid's market share is expected to gradually rise. Although there is currently a gap between Hyperliquid and Binance, the market share for Hyperliquid saw a significant increase in December. Over the past two weeks, Hyperliquid’s relative market share has maintained a range of approximately 5% to 8%. According to Coingecko, Binance's recent daily trading volume for derivatives has ranged between $60 billion and $150 billion, but one should approach these figures with caution as they cannot be verified from centralized exchanges.

(2) Spot Trading Volume

In addition, Hyperliquid also features a spot token market. Since the launch of HYPE, spot trading volume has significantly increased, with the most traded tokens including HYPE, PURR, HFUN, and PIP.

Tokens are added to Hyperliquid's spot market through an auction process, where the highest bidder gains the right to launch their ticker. This auction takes place every 31 hours, with the current starting bid set at approximately $300,000. Notably, during the GOD token auction on December 16, bids reached nearly $1 million.

Fees and Revenue

(1) Perpetual Trading (Perps)

On the Hyperliquid platform, traders bear the transaction fees, which are relatively low and more incentivizing for trading activities compared to other exchanges like Binance. For perpetual futures trading, the fees for most market orders (takers) are 0.035%, while the fees for limit orders (makers) are 0.01%. The larger the trading volume, the lower the fees paid.

To estimate the fees collected by the protocol, it is necessary to calculate the average fees paid by traders, which includes the trading volume and average fee levels for both takers and makers. ASXN provided a detailed analysis in its September report, indicating that the average fee paid is approximately 0.01276%. This figure is a conservative estimate, as it assumes the existence of rebates for market makers.

Considering this average fee, if Hyperliquid's daily trading volume for perpetual futures averages between $5 billion and $10 billion, the annual fees could reach between $232,870,000 and $465,740,000. In reality, due to the conservative assumptions, the actual fees may be higher.

These fees will be allocated to various addresses, including the HLP liquidity pool, insurance fund, and assistance fund. Since the team has not disclosed the specific allocation of trading activity fees, it is challenging to accurately assess the buyback situation for HYPE.

(2) Spot Trading

In the spot market, the fees paid by traders are primarily used to purchase and burn transaction tokens. As the main token for spot trading volume on Hyperliquid, HYPE naturally accounts for a significant portion of this. Currently, over 100,000 HYPE has been burned from spot trading fees, estimated at $2.5 million based on current prices. From a macro perspective, this has little impact on HYPE's total supply, at least for now.

(3) Spot Auctions

Hyperliquid also generates substantial revenue from the fees paid by winning bidders in the spot auctions. Assuming a bid of $300,000 per auction, Hyperliquid's annual revenue could increase to $84,774,000. A user named Flo recently posted an insightful analysis on X, exploring Hyperliquid's revenue under different auction prices and daily trading volumes. If each spot auction amounted to $1 million and daily trading volume reached $6 billion, Hyperliquid's annual revenue could be projected at $829.5 million. At a price-to-earnings ratio of 30, this would value HYPE at $74.52 per token.

Assistance Fund and HYPE Buybacks

While it is currently unclear how the revenue from spot auctions and perpetual trading is distributed among the Assistance Fund (AF), insurance fund, HLP, and other addresses, we can assess HYPE's daily buyback situation through the Assistance Fund. A few days ago, I published a post on X analyzing the HYPE buyback situation from the Assistance Fund over a 48-hour period. The data showed that 151,000 HYPE were repurchased during this time, resulting in an annualized buying pressure of $686 million. In recent days, Hyperliquid's daily average trading volume has reached $8 billion.

Compared to many other crypto protocols, HYPE can directly benefit from the revenue generated by Hyperliquid.

Conclusion

Looking ahead to 2025, the bullish potential of HYPE primarily stems from the continued growth in trading volume on the Hyperliquid exchange and the increasing demand for spot auctions, which will drive revenue and, consequently, HYPE buybacks. Hyperliquid is attracting more users due to its allocation of billions of dollars in future rewards, making it a very profitable trading venue. Furthermore, Hyperliquid has fostered a strong user community around the protocol and HYPE, where members actively share ideas and engage in discussions.

With the introduction of new features such as staking, perpetual trading token margins, and the application ecosystem brought by HyperEVM, many potential positive factors are worth anticipating in the future.

Risk Warning

While the cryptocurrency market offers significant growth potential and innovation opportunities, it also carries a high level of market risk and price volatility. The value of crypto assets can fluctuate dramatically in a short period, potentially leading to substantial financial losses for investors. Additionally, the cryptocurrency market faces multiple risk factors, including technical risks, legal and regulatory uncertainties, cybersecurity threats, and market manipulation. We strongly advise users to conduct thorough research and due diligence before making any investment decisions and to consult professional financial advisors. All investment decisions are made at the user’s own risk. Thank you for your trust and support of Venkate!

Building The Future of Crypto Exchange

Where Meet a Confluence of Inspiration and Innovation

Venkate Exchange is an innovative cryptocurrency trading platform, drawing its name and inspiration from Venkateswara—a deity symbolizing wealth and prosperity in Indian mythology.