A quick look at Hyperliquid: product status, economic model and valuation

Author: Lawrence Lee

1. Introduction

Hyperliquid is the biggest highlight of the recent crypto market besides AI and Meme. Its strategy of not accepting VC investment, distributing 70% of tokens to the community and returning all income to platform users has attracted market attention. Its strategy of directly repurchasing HYPE with its income has made HYPE's circulating market value quickly surpass UNI and rank among the top 25 cryptocurrencies, and also caused its platform business data to soar across the board.

This article aims to describe the current status of Hyperliquid's development, analyze its economic model, and analyze the current valuation of HYPE, and give an answer to the question of "Is HYPE expensive?"

This article is the author's interim thinking at the time of publication. It may change in the future, and the views are highly subjective. There may also be errors in facts, data, and reasoning logic. Criticism and further discussion from peers and readers are welcome, but this article does not constitute any investment advice.

A considerable part of the content in this article refers to the Hyperliquid research report released by ASXN in September. This is also the most comprehensive and in-depth Hyperliquid research report I have read. If readers want to know more about the details of Hyperliquid's mechanism, they can refer to this research report.

The following is the main text.

2. Hyperliquid's business overview

Hyperliquid's current business mainly includes 2 parts: derivatives exchange and spot exchange. They also plan to launch a general EVM-HyperEVM in the future.

Hyperliquid Architecture Source: ASXN

2.1 Derivatives Exchange

The derivatives exchange is the first product launched by Hyperliquid. It is Hyperliquid's flagship product and plays a core role in its entire product ecosystem.

At the core product mechanism level of derivatives, Hyperliquid did not adopt other innovative product logics (such as GMX, SNX, etc.) due to the performance bottleneck on the chain. Instead, it still chose the Central Limit Order Book (CLOB), which is the most widely used mechanism by various exchanges around the world and is also the most familiar mechanism for all trading users and market makers, and worked hard on performance.

The decentralized derivatives exchange they built runs on Hyperliquid L1, a PoS chain consisting of the consensus layer HyperBFT and the execution layer RustVM.

HyperBFT is a consensus algorithm modified by the Hyperliquid team based on LibraBFT developed by the former Meta blockchain team, which can support up to 2 million TPS. With the powerful performance support of the underlying layer, Hyperliquid has put the core components of derivatives exchanges such as order books and clearing houses on the chain, and finally formed its decentralized derivatives exchange architecture.

For end users, the experience of Hyperliquid is almost exactly the same as that of centralized exchanges such as Binance, not only in terms of trading experience and product structure, but also in terms of transaction 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 the Vault function since the beginning of the product. Vault is similar to the "copy order" in centralized exchanges. Everyone can invest funds in any Vault, which will be invested by the Vault manager. 10% of the profits will be allocated to the Vault manager. At the same time, in order to maintain consistency of interests, the manager needs to ensure that he holds at least 5% of the Vault.

Source: hyperliquid official website

However, judging from the current TVL, 95% of TVL is in the official Vault HLP.

Unlike ordinary Vaults, HLP is the official Vault and actually acts as the counterparty of many transactions on the platform, so HLP can obtain part of the platform's various fees (transaction fees, funding fees, and clearing fees). From this perspective, HLP is relatively similar to GMX's GLP, with the difference being that GLP acts as the counterparty to all transactions on the platform, and its strategy is passive and public; while HLP's strategy is non-public, and the counterparty to user transactions may be HLP or other users, and HLP's strategy can be adjusted at any time.

Since its launch in July 2023, HLP has almost always held a net short position, providing liquidity for retail transactions, and has maintained profitability with a net short position in the long-term bull market. Currently, TVL is $350 million and PNL is $50 million. Judging from the overall PNL curve of HLP and the PNL of the three strategy addresses, the Hyperliquid team is using fees to maintain a relatively positive APR for its HLP.

Source: Hyperliquid official website

From the perspective of trading volume and holdings, Hyperliquid has developed rapidly, especially in the past two months. With the $HYPE airdrop and the continued rise in prices, the platform's various data also reached a high point between December 17-20.

Hyperliuqid's trading volume, holdings, and number of traders since 2024 Source: Hyperliquid official website

In the field of decentralized derivatives market, in terms of trading volume, Hyperliquid has taken the lead since June this year. In the past two months, other decentralized derivatives exchanges and The gap between Hyperliquid and FX further widened, and now there is an order of magnitude gap.

Trading volume share of decentralized derivatives exchanges Source: Dune

7-day trading volume ranking of decentralized derivatives exchanges Source: DeFiLlama

From the perspective of valuation and trading volume, the more appropriate comparable object for Hyperliquid is currently the centralized exchange.

Screenshot time: 2024-12-28 Source: Coingecko

Hyperliquid's recent data has declined significantly (the highest daily trading volume is 10.4 billion US dollars, and the trading volume in recent days is less than 5 billion US dollars), but its holdings are still 10% of Binance, and its trading volume is 6% of Binance; its holdings and trading volume are roughly equivalent to 15% of Bitget and Bybit. At its peak (December 17-20), Hyperliquid's holdings reached 12% of Binance's and its trading volume reached 9% of Binance's; both holdings and trading volume data were close to 20% of Bybit and Bitget.

Overall, Hyperliquid's derivatives exchange has developed rapidly and has a relatively solid leading advantage in the field of decentralized derivatives exchanges. Compared with the leading centralized exchanges, its gap has narrowed to less than 10 times.

2.2 Spot Exchange

Hyperliquid's spot exchange is also in the form of an order book, and is consistent with derivatives exchanges in terms of product architecture and fee standards.

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

Hyperliquid's current top spot tokens by market value

HIP-1 (decentralized listing)

HIP-1 is similar to ERC-20 or SPL-20, and is 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, because the successful creation of a HIP-1 token also means that it can be listed on Hyperliquid's spot exchange.

Hyperliquid's HIP-1 is publicly conducted in the form of a Dutch auction. Specifically:

Everyone can participate in the auction. The initial price of the auction is 2 times the transaction price of the last auction, and it continues to drop linearly to 10,000U within 31 hours (this value is adjustable, it was lower before, and it was recently adjusted to 10,000U). The first developer who successfully bids will be eligible to create a TICKER, which can be listed on Hyperliquid's spot exchange, and the auction amount is paid in USDC.

Recent auctions and transaction prices:

Source: asxn

The created Tickers that are worth noting include (in descending order of auction amount):

• GOD: A game invested by Pantera

• CREAM: Cream, a long-established lending project plagued by hackers, a Machibigbrother-related project

• ANIME: Azuki's token ticker. It is rumored that the AZUKI team won it, but it has not been officially confirmed yet

• MON: publisher of the game Pixelmoon

• SWELL: pledge & re-pledge protocol for the Ethereum ecosystem

• RIFT: Virtual-based game protocol J3ff

• GAME: rumored to be won by Virtual-based GAME, but it has not been officially confirmed

• ANZ: stablecoin protocol for the base chain

• SOVRN: the former BreederDAO (a game asset platform invested by a16z and Delphi in the previous cycle), which is about to release games on Hyperliquid

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

• ETHC: Machibigbrother associated mining project

• SOLV: Bitcoin ecological pledge agreement, with BN labs investment, and no coin has been issued yet.

SOLV can be roughly regarded as a demarcation point of the HIP-1 auction. Before that, it was generally meme and domain name logic, ticker was mostly symbolic, and the focus of hype was the uniqueness within the ecosystem.

After SOLV, most of the project parties came to grab the ecological niche & coin listing qualifications, and the price gradually rose. The highest GOD was auctioned for nearly 1 million US dollars. The project direction is mainly pan-entertainment, with games and NFT accounting for the majority, but there are also DeFi projects such as Solv, Swell and Cream.

In addition, as an exchange, Hyperliquid's spot "listing fee" has been stable at more than 100,000 US dollars in the past month, which is close to the listing fees of some second-tier centralized exchanges.

Through HIP1, Hyperliquid has an open "decentralized listing" mechanism. The listing fees paid are determined by market participants themselves, and there will be no problems with centralized exchanges listing. On the other hand, the listing fees collected will be used for HYPE repurchase and destruction, which is also beneficial to HYPE's price performance and valuation indicators.

HIP-2 (Hyperliquid's AMM)

Since Hyperliquid's spot trading operates in the form of an order book, it is difficult to guarantee the liquidity of new coins. Hyperliquid proposed HIP-2 to solve the initial liquidity problem of tokens created through HIP1.

In short, HIP2 provides an automatic market-making system that allows developers to automatically make markets for tokens generated by HIP-1. The market-making logic is linear market-making within a range. Developers specify the upper and lower price limits of the market-making range, as well as the buying and selling demarcation points. The system automatically makes markets within the range with each 0.3% price change as a grid.

The following figure is an order book using HIP-2 and its parameter settings:

After the launch of HIP-2, many newly created Hyperliquid ecological tokens chose to use this set of Hyperliquid's AMM mechanism. At present, the total USDC volume of HIP-2 has exceeded 25 million US dollars.

Hyperliquid's average daily spot trading volume in the past 30 days is about 400 million US dollars, ranking in the top ten among DEXs, and is similar to the trading volumes of Curve, Lifinity and Orca.

Source: DeFillama

2.3 HyperEVM

HyperEVM is not yet online. In Hyperliquid's official documentation, the RustVM currently used by derivatives and spot exchanges is called Hyperliquid L1, and HyperEVM is called EVM. According to the definition 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 the rest of L1. This enables EVM to interact directly with local components of L1, such as spot and perpetual order books.

The ASXN report uses the following figure to describe the architecture of Hyperliquid:

Hyperliquid carries two execution layers (RustVM and HyperEVM) on a consensus layer (HyperBFT). Its core functions of contracts and spot are carried on RustVM, and RustVM will also focus on these two core dAPPs, and the rest of the dAPPs will be carried on HyperEVM.

As for HyperEVM, according to the team's documentation, we know:

• Unlike RustVM where Hyperliquid's current spot and exchanges are located, HyperEVM is permissionless, which means that any developer can develop applications and issue assets (FT or NFT) on it

• HyperEVM is interoperable with Hyperliquid's L1. For example, the oracle of L1 can be used by HyperEVM, and the transfer of some currencies can also be communicated between the two VMs. (Not all of them can be interoperable because the assets on L1 are "permitted" and only include USDC and assets generated through HIP-1, while HyperEVM has many more assets)

• HyperEVM will use Hyperliquid's native token $HYPE as Gas, while Hyperliquid's current L1 does not require users to pay for Gas.

The author has never seen a similar product architecture in the crypto world before, and we are not sure how to implement a typical case of DeFi composability on the Ethereum network, "deposit ETH into Lido to get stETH, then deposit stETH into Aave to borrow USDC, and then use USDC to buy Meme token PEPE" on HyperEVM and Hyperliquid L1 under the current architecture (this may be the standard for defining whether it is one chain or two chains). However, in my current understanding, the relationship between HyperEVM and Hyperliquid L1 may be more like the relationship between "L2 and L1 with certain interoperability", or the relationship between a centralized exchange and its exchange EVM chain (such as Binance and BNB Chain or Coinbase and Base Chain)

Currently, the HyperEVM testnet is operating normally, and many validators have begun to participate in the testnet verification of HyperEVM, including Chorus One, Figment, B Harvest, Nansen, etc.

HyperEVM test network verification node list Source: ASXN

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

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

HyperEVM is open to all developers, and there are many projects planned to be released on HyperEVM. In addition to the projects that have successfully obtained HIP-1 tokens mentioned above, the following figure and the Hypurr.co website list a considerable part.

We still need to wait for the official launch of HyperEVM to see the specific mechanism and relationship with Hyperliquid L1. At present, the official has not given the planned launch time of HyperEVM.

Summary: Hyperliquid's current overall business positioning is similar to that of the head trading group. Its core business is trading + L1 operation, and it has become a direct competitor of major trading groups. Although the business model is consistent, Hyperliquid is different from the existing head trading groups in that it chooses to build its trading business on the chain. Compared with CEX, which requires permission and has opaque data, the advantages of Hyperliquid's trading platform are permissionless access (no KYC required), transparent and verifiable business data, better composability, and lower overall operating costs, which also enables it to transfer 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 Company. The Hyperliquid team is quite lean. According to ASXN's September report, the team has 10 members, 5 of whom are engineers, which is especially true for a derivatives exchange with a daily trading volume of over 10 billion.

From the entire product process currently built by the Hyperliquid team, especially their insistence on self-funded research and development, self-built high-performance chain to achieve a complete on-chain order book, and the highly innovative HIP-1, the team's ability to solve problems based on first principles is impressive despite its lean staff.

3.2 $HYPE economic model

The total amount of $HYPE is 1 billion, which was officially released on November 29, 2024. Since there is no financing, there is no investor share. The specific distribution is as follows:

• 31.0% Genesis allocation, which was airdropped to early users of Hyperliquid according to the number of points and is fully circulated.

• 38.888% for future emissions and community rewards

• 23.8% is allocated to the team and will be released after 1 year of lock-up. Most of it will be released between 2027 and 2028, and some will continue to be released after 2028

• 6.0% Hyper Foundation

• 0.3% community grants

• 0.012% HIP-2

The team and the community are generally allocated in a ratio of 3:7. The current currency holding addresses are as follows:

Except for the community address, team address and foundation address, the address with the most currency is the Assistance Fund (hereinafter referred to as AF), which holds 1.16% of the total HYPE and 3.74% of the circulation.

Currently, there are two parts involving fees in the Hyperliquid ecosystem: transaction fees and HIP-1 auction fees. Transaction fees include spot and contract transaction fees, contract funding fees, and contract liquidation fees. Since Hyperliquid L1 does not charge users for gas fees and HyperEVM has not yet been launched, Hyperliquid's current income does not include transaction gas fees.

According to the team in the document:

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.

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

All fees go entirely to HLP and AF. However, the team did not clearly inform the ratio of fees between HLP and AF. Fortunately, the data of Hyperliquid L1 is publicly available. According to @stevenyuntcap's speculation logic, as of early December, Hyperliquid has subsidized HLP for a total of 44 million US dollars since its launch, and the initial AF funds used to purchase HYPE are 52 million US dollars. It can be concluded that Hyperliquid's cumulative revenue from its launch to early December is 96 million US dollars, that is, the distribution ratio of the total revenue of the protocol in HLP and AF is 46%:54%. (In addition, we can also use the accumulated transaction volume of Hyperliquid during this period of 428 billion US dollars to convert the average contract rate of the Hyperliquid protocol to about 0.0225%).

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

Of course, in addition to the perpetual contract trading fees, Hyperliquid will have two more parts of income that will benefit HYPE holders: the auction fees from HIP-1 and the USDC portion of spot trading fees. Currently, these two parts of income also all go to AF to repurchase HYPE (it also includes the HYPE portion of the HYPE-USDC spot trading fee, which is currently directly destroyed, with a cumulative destruction of 110,000 HYPEs).

At present, AF's strategy is still to regularly purchase all the accumulated USDC for HYPE, so we can simply track Hyperliquid's profits and the repurchase of HYPE based on AF USDC inflow data. According to data from hyperdata.info, AF's cumulative USDC inflow currently exceeds US$77 million, and more than US$25 million in the past month, with an average daily repurchase of about US$1 million of HYPE.

On December 30, 2024, Hyperliquid officially launched the HYPE staking function. The current yield of HYPE staking is about 2.5%. This part of the income only includes the fixed PoS consensus layer income. Its yield consensus refers to the yield consensus of the Ethereum consensus layer (the yield is inversely proportional to the square of the number of staked HYPE). In addition to the 300 million tokens of the team and the foundation, there are also nearly 30 million user tokens involved in the staking.

Looking to the future, there are still many possible adjustments to HYPE's economic model, such as:

• HyperEVM is launched,

• $HYPE is used as gas for HyperEVM

• The execution layer income is distributed to HYPE stakers (the current HYPE stake income only includes)

• The handling fee is redistributed to $HYPE holders

• $HYPE staking fee is discounted

3.3 Valuation

Below we will explore the following two valuation frameworks for Hyperliquid. Before we begin, it should be pointed out that

• Hyperliquid's own data has changed greatly - its market value, TVL, revenue, user data, etc. have increased several times or even dozens of times on the original basis in the past month, and then there has been a 50% retracement. The drastic degree of change in its own indicators is far better than the comparison shown by the valuation indicators listed below. The following valuation framework is more suitable for long-term valuation reference.

• HYPE price is currently the biggest fundamental of Hyperliquid. The surge in its various data is more the result of the rise in HYPE price, rather than "because Hyperliquid has such good data, it has such a price."

Framework 1: Comparison with BNB

The main thesis of Hyperliquid is the "Binance on the chain" proposed by Messiri:

This analogy is generally reasonable, and it may indeed be a better framework. Binance/BNB may indeed be the most suitable comparison object for Hyperliquid/HYPE

• Hyperliquid's core business is derivatives and spot exchanges, which is consistent with Binance's main business;

• HyperEVM can be compared with BNBChain In contrast, although HyperEVM has not yet been launched, according to the current design, both HYPE and BNB can be used as Gas for the EVM chain, and both can be pledged to obtain income;

• HYPE and BNB can directly benefit from platform transaction fees;

Below, we will compare Hyperliquid with Binance by dividing it into derivatives exchanges, spot exchanges, and EVM according to the Hyperliquid architecture.

• Derivatives Exchange:

As mentioned above, the recent data on Hyperliquid's holdings and trading volume are about 10% of the corresponding data of Binance, so we roughly believe that in the derivatives exchange module, HYPE = 10% BNB.

• Spot Exchange:

Hyperliquid's average daily spot trading volume in the past thirty days is about 400 million US dollars, while Binance's average daily spot trading volume is about 26 billion US dollars after excluding the FDUSD trading pair with no handling fee. HYPE = 1.5% BNB.

• EVM:

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

HyperEVM is not online yet, so we cannot confirm how much TVL will be migrated from RustVM to HyperEVM. However, from the perspective of product architecture and corresponding experience, the overall logic is still based on the migration of existing users of the exchange. We list the data of Binance and Coinbase, and considering the market sentiment towards Hype, we assume that 10% of the Exchange TVL will be migrated to the chain (still optimistic, but most of the articles using TVL valuation currently assume that 100% of Hyperliquid TVL will be migrated to HyperEVM). According to this calculation, HYPE = 3%BNB.

• Economic model

In addition, we also need to consider the difference between the economic models of HYPE and BNB.

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

BNB previously used 20% of Binance's net profit to repurchase BNB according to the white paper. After the repurchase and destruction were decoupled from the platform's net profit in 2021, we have no way of knowing the proportion of Binance's net profit empowerment for BNB. However, judging from the trend of the destruction data and Binance's market position in the same period, the proportion of net profit destruction is probably maintained at a similar level.

From the perspective of the economic model (for coin holders), HYPE is significantly better than BNB.

BNB historical destruction data   source

It is also worth mentioning that the proportion of Hyperliquid's current revenue flowing to HYPE tokens is 54%, and this value still has room for further increase. Due to mechanism reasons, HLP has been holding a large number of cryptocurrency short positions with USDC as collateral in the bull market where BTC has risen by more than 200% since July 2023. Although HLP's own strategy is appropriate and it has rarely maintained a break-even, it still needs to pay an annualized APR of more than 30% to retain funds in HLP.

HLP historical net position Source: Hyperliquid official website

In the future, as the market gradually peaks, the overall trend of crypto users as net longs in derivatives will not change. The probability of HLP's own strategic returns increasing in volatile and bear markets will increase (we can see the same trend from the historical returns of GMX's GLP and GNS's Vault). Hyperliquid may not need to pay such a large proportion of its income as rent to HLP, and Hyperliquid's net profit margin is still expected to increase further.

Speaking of net profit margin, we have no way of knowing the specific net profit margin of Binance, but we can get a glimpse of the operating costs of centralized exchanges from the report of the listed company Coinbase.

Coinbase quarterly report 24Q3

It can be seen that in 2023, Coinbase's operating expenses (research and development, management, sales expenses and transfer expenses) averaged more than 600 million US dollars per quarter, which is basically equivalent to all revenue, and the net profit margin is close to 0; in 2024, with the outbreak of the market, its net profit margin has improved a lot, but the net profit margin is still less than 30%.

From the above numerical comparison, we can clearly see the advantage of Hyperliquid's net profit margin (economic model) over centralized trading. We can also look at this advantage from a specific event: the handling of the coin listing problem.

The listing of coins on centralized exchanges is usually handled by a dedicated coin listing team. They need to track market hotspots and negotiate with various project teams to collect coin listing fees and/or project tokens. Centralized exchanges need to pay the coin listing team a considerable salary and commission, and also need to pay the salary of the internal control team that monitors and handles the possible interest transfer problems in the coin listing process.

As mentioned above, Hyperliquid's coin listing process HIP-1 runs automatically based on pre-determined code, and the operating cost of new coin listings is infinitely close to 0, so that its income "coin listing fees" can be fully allocated to HYPE holders.

To sum up, at the end of December 2024, we have the following comparison:

• Derivatives trading: HYPE = 10% BNB

• Spot trading: HYPE = 1.5% BNB

• EVM (estimated): HYPE = 3% BNB

• Economic model: HYPE is significantly better than BNB

• Circulation market value: HYPE = 9% BNB

• Total circulation market value: HYPE = 27% BNB

Framework 2: PS

HYPE has a token repurchase and destruction mechanism, which directly affects the HYPE token. The PS indicator can be used for valuation, as follows:

• Contract transaction fees:

We make an estimate based on an average contract transaction fee of 0.0225% and a 46:54 distribution of profits between HLP and AF.

Hyperliquid contract revenue in the latest month = 154.7 billion US dollars * 0.0225% = 34.8 million US dollars, of which about 54% went to AF for repurchase of HYPE, and the amount of HYPE repurchase = 18.79 million US dollars, corresponding to an annualized net profit of 225.5 million US dollars.

• HIP-1 auction fee:

Revenue in the latest month was 6.1 million US dollars. With the distribution ratio of HLP and AF46:54, the corresponding annualized net profit is 39.5 million US dollars.

• Spot trading fees:

The fee standard for Hyperliquid's spot trading fees is the same as that for contract trading, and the distribution method of the USDC part of the fees is also the same as that for contract trading, that is, the profit is distributed between HLP and AF at a ratio of 46:54; the fees of other tokens in spot trading (such as HYPE-USDC transactions, HYPE buyers pay USDC fees, and HYPE sellers pay HYPE fees) are directly destroyed.

Therefore, we need to calculate the net profit of HYPE from spot transaction fees in two parts:

• HYPE part: You can directly query it through the block browser. The TGE of HYPE tokens is exactly 30 days, and the number of HYPE destroyed is 110,490, corresponding to an annualized destruction of 1,325,880, which is about 37 million US dollars at the current price.

• USDC part: Hyperliquid's spot trading volume in the past 30 days is 11.5 billion US dollars. The part used to repurchase HYPE in spot transactions = 11.5 billion US dollars * 0.0225 * 54% = 1.397 million US dollars, corresponding to an annualized net profit of 16.77 million US dollars.

Combining the above three parts of expenses, we make an annualized calculation based on the data of the most recent month, and the amount used to repurchase HYPE is US$318,770,000.

According to the circulating market value, HYPE's P/S is 29.4, and according to the full circulating market value, HYPE's P/S is 88.

We have listed some circulating P/S indicators of crypto projects that are comparable to Hyperliquid:

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

The above are two frameworks for HYPE valuation. It is necessary to remind you again that:

Hyperliquid's own data changes greatly - its market value, TVL, revenue, user data, etc. have increased several times or even dozens of times on the original basis in the past month, and then there was a 50% retracement. The intensity of its own indicator changes is far better than the comparison shown by the valuation indicators listed below. The above valuation framework is more suitable for long-term valuation reference.

HYPE price is currently the biggest fundamental of Hyperliquid. The surge in its various data is more the result of the rise in HYPE price, rather than "because Hyperliquid has such good data, it has such a price."

4. Risks

The risks faced by Hyperliquid are as follows:

• Fund risk. Currently, all funds of Hyperliquid are stored in the bridge of its Arbitrum network. The security of the smart contract and the multi-signature of 3/4 teams that manage all funds are crucial.

• Code risk, including the current L1 risk and the HyperEVM risk. Hyperliquid adopts an innovative architecture and consensus. The current non-open source status of its L1 reduces the possibility of being attacked. However, as Hyperliquid grows in size and influence, and HyperEVM is launched, the possibility of potential attacks/code vulnerabilities gradually increases.

• Oracle risk, this is an inherent risk of all derivatives exchanges.

• Regulation leads to loss of comparative advantage. No need for KYC is currently Hyperliquid's main comparative advantage over centralized exchanges. As Hyperliquid continues to grow in size, there may be regulatory requirements such as anti-money laundering from regulators.