Key Points
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Hyperliquid is the leader of the decentralized perpetual futures market.
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The trading activity it captures from that market generates a lot of fees.
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Those fees are almost entirely spent on buybacks of its own token.
Crypto bear markets, like the one we’re in right now, have a way of separating the wheat from the chaff in terms of what’s worth investing in. While the popular coins of yesteryear that were held up merely by the market’s hot air have now collapsed, many of them by 90% or more, a new generation of quality assets is rising, and they’re avoiding the flaws that made their predecessors also prone to having their value evaporate when the market cools.
One of those rising challengers is Hyperliquid (CRYPTO: HYPE), and it’s the top cryptocurrency to buy and hold at the moment. Here’s what’s special about it.
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This coin has a tokenomics loop that pulls its weight
Hyperliquid is a decentralized exchange for financial derivatives that runs on its own blockchain. Users trade its most popular type of derivatives, perpetual futures, as well as spot token pairs, tokenized commodities, tokenized stocks, and even prediction markets, all from one platform.
Much as a company can buy back shares of its own stock to reduce the shares in circulation and thereby make the remaining shares more valuable, 99% of the platform fees on Hyperliquid go toward buying the network’s native token, Hype, on the open market. With more trading, more fees are generated, which in turn creates more buyback pressure. Around 46.8 million Hype, or 15.7% of its circulating supply, worth around $3.1 billion, has been bought back since the network’s launch in late 2024.
Its share of global perpetual futures trading volume (which includes platforms outside the crypto sector) is currently 7.4%. Among its peers running decentralized on-chain platforms for perpetuals, it controls 68.4% of the market by volume. It thus stands to capture a lot of the growth in perpetuals trading volume.
Another important capability is that, for a fee, anyone can deploy their own perpetuals market on Hyperliquid and then capture some of the fees generated from its volume. Those self-deployed markets make up around 33% of the network’s total volume, and they’re likely to be a driver of growth.
There isn’t a free lunch here
Every investment has risks, and Hyperliquid is no exception.
First, it can’t yet operate legally in the U.S., which locks it out of the largest pool of retail and institutional capital seeking exposure to its perpetuals. Its ceiling is capped for as long as this remains the case.
Second, and more importantly, the buyback mechanism could lose steam if trading volume drops, and competition from numerous other players, like Aster and Lighter, is fierce and intensifying. So competitors may well erode its early lead.
Finally, its supply isn’t fully circulating. 41.3% of its supply remains locked and is set to be issued in the future. If the pace of the buybacks doesn’t surpass the pace of the supply unlocks, holders’ value will be diluted tremendously. But so far, that hasn’t happened.
Hyperliquid is, in my view, the most compelling investment opportunity in crypto at the moment, and it’s worth buying and holding for at least a few years, with the understanding that it’s a pretty risky play.
Should you buy stock in Hyperliquid right now?
Before you buy stock in Hyperliquid, consider this:
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hyperliquid. The Motley Fool has a disclosure policy.
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