Hyperliquid

No VCs, No CEXs, No Problem

Hyperliquid needs no introduction—its dominance in trading volume and popularity among perps traders, seamless on-chain execution, and self-sustaining value accrual model speak for themselves. Crypto’s real game is trading—always has been, and two pillars dominate value capture in crypto: L1 chains and exchanges. What makes Hyperliquid different is that it actually built both from scratch, optimized as a single platform—it’s building crypto’s kingmaker: the entire stack, from chain to exchange.

Custom-built from scratch by a lean team and with no VC backing, token holders can enjoy a CEX-like UX with little token dilution devaluing their holdings. What started with Binance being the most dominant CEX, later on launching its own L1 to leverage its distribution has now become the broader vision and ambition for Jeff’s thesis: the chain ecosystem and the exchange should be bolted together.

The thesis below explores why Hyperliquid is a one-of-a-kind moat that will be increasingly hard to replicate. The actual vision, combined with a remarkable track record of execution, denotes that Hyperliquid can actually represent one of the most ambitious endeavors for value accrual in crypto: trading infrastructure and L1 chain, all vertically integrated in a single platform.

Key Takeaways

• Core Thesis: Hyperliquid is the first and only precedent fusing a L1 and a trading exchange in a single platform, targeting crypto’s two most profitable verticals.
• Market Position: Right upon token launch, $HYPE achieved a $9B valuation, now with a FDV hovering around ~25B (#24 rank by market cap in Coingecko), with no VC backing and/or CEX listings—just organic growth supported by a cult-like community.
• Competitive Edge: A fully integrated, high-performance exchange built from scratch with a custom L1, eliminating the liquidity fragmentation and inefficiencies of traditional DEXs while competing in UX and distribution against CEXs.
• Product-Market Fit: Hyperliquid dominates in trading volume, liquidity, and fee generation, proving itself as the only self-custodial and non-KYC alternative capable of competing with Binance and Bybit.
• Revenue Model: 54% of trading fees are used for aggressive $HYPE buybacks via the Assistance Fund, creating sustained buy pressure. Another 46% goes to liquidity providers, strengthening market depth and execution quality.
• No VC or Inflationary Overhangs: With no early investor unlocks, Hyperliquid avoids artificial price floors, forced selling, or dilution—aligning incentives with users instead of VCs.
• Wealth Effect & Community Loyalty: Airdrop rewards went to real users, not VCs, creating a reflexive loop of committed traders and evangelists, reminiscent of early crypto hardcore communities.
• CEX-Independent Token Launch: $HYPE successfully launched on its own exchange without relying on predatory CEX listing deals, proving its strength and self-sufficiency.
• HyperEVM Expansion: Leveraging its distribution power, Hyperliquid will be making its liquidity and user base available for building an ecosystem. With EVM support to onboard the bulk of crypto devs, these dApps will be able to take advantage of Hyperliquid’s network effects from day one—an ecosystem growth that’s nearly impossible to replicate for existing or upcoming competitors.
• The Reality Check: The current market cap already prices in perfect HyperEVM execution, but we are yet to see dev adoption and whether the market is giving too much credit for future growth before an ecosystem exists.
• Convexity’s Alarm Bells: $HYPE already sits at a ~$25B FDV. Even with strong fundamentals, its valuation may limit near-term upside unless HyperEVM adoption significantly accelerates.
• Range Consolidation & Breakout Failure: $HYPE has been trading within a $19-$26 range. A persistent failure to break above this level with strong volume could indicate exhaustion and lead to a breakdown.
• Declining Reflexivity: The buyback-driven demand loop is a major bullish factor, but if trading volumes decrease or market sentiment shifts, buybacks alone may not sustain price momentum. However, CEX listings could attract the fresh institutional flows needed for further price expansion.
• Technical Nukes: The market may be underestimating the complexity that comes with decentralizing the validator set. Fault tolerance and resilience at that level is yet to be seen once the full ecosystem is fleshed out.

Zero to Billions: The No VC Path

Hyperliquid didn’t start with the usual VC playbook. No early token unlocks, no backroom deals—just Jeff and a lean team bootstrapping the most efficient, self-custodial, non-KYC perpetuals exchange from the ground up. What began as a purely trader-first platform—giving users a CEX-like experience without the baggage of centralized exchanges—quickly evolved into something much bigger. The team realized that to truly compete with Binance, Bybit, and Coinbase, you can’t just be a DEX—you need to be an entire ecosystem.

Without VC funding, Hyperliquid had no choice but to win the market the hard way—by building a product that traders actually want. Instead of offloading early token allocations to VCs, insiders, or private rounds, Hyperliquid flipped the script—it gave those rewards to the people actually using the platform. The result? A massive wealth effect, where many of its earliest users saw their airdrop allocations turn them into multi-millionaires overnight. This was a calculated move to turn its actual core user base—HFTs, market makers, and DeFi power users, into long-term believers and evangelists.

Rather than being VC-funded and VC-dumped, Hyperliquid’s most vocal supporters are the ones who actually trade, use, and benefit from the platform. These real users became its loudest advocates, pushing Hyperliquid into a global movement. The same model that made Ethereum’s early believers rich, that created the Solana diehards, and that turned Binance users into loyalists is now playing out with Hyperliquid but with an even stronger reflexive loop. By putting value back into the hands of its users rather than investors, Hyperliquid has built a foundation of loyalty that no amount of VC backing can replicate.

From a product-market-fit perspective, unlike projects that rely on inflationary token emissions to attract temporary liquidity, Hyperliquid’s model proves its viability through real trading volume and sustained fee generation. This then goes towards Hyperliquid’s assistance fund buyback program, which, apart from offering buy pressure, further proves that Hyperliquid already earns more than enough through fees to fuel this buyback program. The absence of a VC allocation also removes artificial price floors and forced unlock sell pressure, ensuring that the token’s value is driven primarily by demand from active users rather than speculative insiders looking for exits. This fosters a decentralized, trader-first ecosystem that reinforces itself as more users recognize its advantages.

Breaking Free from CEX Chains

When the Hyperliquid airdrop was first distributed, it was a completely frictionless process with no downtime, website crashes, network congestion, or gas fee spikes. More importantly, 100% of the trading volume took place on Hyperliquid itself, without relying on external CEXs for liquidity.

Often, in order to launch on CEXes, project teams allocate a certain percentage of the token supply to the CEX’s market makers to support prices on the launch. On top of that, there is also a hefty listing fee, and potentially embedded agreements that could affect organic price discovery as institutional liquidity providers seek to generate profit.

By launching $HYPE exclusively on its own exchange, Hyperliquid avoided the predatory listing fees, restrictive market-making agreements, and potential price manipulation often associated with these listings. This approach ensures that price discovery remains entirely organic, driven purely by real user demand and transparent market dynamics, rather than being influenced by CEXs or external liquidity providers.

Apart from the drawbacks that come with CEX listing agreements, $HYPE exclusively trading spot on Hyperliquid means trading volume is concentrated within its own ecosystem, allowing them to corner the market’s volume for the most anticipated token launch of the year.

This was smart by the Hyperliquid team knowing that they had clear PMF and organic demand, and if CEXes or other institutional LPs wanted to list or market make, they would have to acquire tokens themselves on the open market—just like everyone else. This not only contributes to persistent buying pressure but also accrues fees to Hyperliquid and thus benefits its holders, further reinforcing the exchange’s revenue model, and deepening its liquidity moat.

The Quiet Behemoth

Generally across L1s and L2s, there has been a slump in terms of TVL and on-chain volumes as users go on defense and are more fearful of deploying to on-chain DeFi products. Revenue generation from various chains have also been underperforming, as they mainly rely on on-chain activity in the form of traditional lending/borrowing, DEX swaps, etc.

Furthermore, Hyperliquid isn’t playing the usual crypto game. They built what everyone else fakes: true chain-exchange fusion. All of this with no VC backing and launching the $HYPE token in its own exchange, rapidly reaching a double-digit valuation without allocating supply for CEXs. The outcome of such a bold step has been remarkable, and Hyperliquid currently sits at rank 26, with a market cap just under $9B.

Despite superior product-market fit, deep liquidity, and real revenue generation, $HYPE’s market cap currently lags behind many Layer 1s that rely more on speculative narratives than actual adoption. Chains like $AVAX, $XLM, and $TON continue to command multi-billion-dollar valuations despite struggling with meaningful user adoption, developer activity, or sustainable fee capture.

As capital increasingly prioritizes fundamentally sound, revenue-generating projects, Hyperliquid’s compounding growth, market dominance, and reflexive buyback-driven tokenomics make it a prime candidate to overtake bloated Layer 1s and cement itself in the league of Ethereum and Solana.

Value Loop: Users Win

Most L1s capture value through indirect means: transaction fees that may get burned, staking rewards that create temporary lockups, and vague promises of “ecosystem value” and “monetary premium for selling blockspace” provided there is enough demand. Meanwhile, DEX tokens typically offer governance rights and fee sharing—but those rights are often worthless and those fees are often tiny (sometimes not even shared with token holders, as is the case with Uniswap, the largest spot DEX in all of crypto). The Hyperliquid playbook is different.

Trading Fee Buybacks (Assistance/Insurance Fund): Hyperliquid charges trading fees on its perpetual futures and spot exchange. These fees are not simply kept as profit by the team; instead, the majority are funneled into community-benefiting pools. ~54% of all trading fees are used to buy back $HYPE tokens on the open market. This occurs via the Assistance Fund (AF), which accumulates fees (denominated in $USDC), and continually executes buy orders for $HYPE. The Assistance Fund has bought back 15M $HYPE worth over $390M to date, reducing circulating supply and consistently adding buy pressure for $HYPE. This becomes significant in current market seasons when most alts are bleeding against $BTC.

Liquidity Provider Rewards (Supply Side Value): The remaining portion of fees (about 46%) is allocated to HLP (Hyperliquid Liquidity Provider) holders. HLP is a market-making vault that users can contribute to (akin to providing liquidity). Essentially, liquidity providers who stake into the HLP vault earn a share of fees as rewards for supplying capital and tightening spreads on the exchange. This mechanism facilitates deep liquidity on the order books by rewarding market makers, which in turn improves the trading experience and attracts more volume. While this doesn’t directly go to $HYPE holders, it’s part of the sustainable ecosystem design—traders get a CEX-like tight spread experience, and LPs get compensated in fees. Importantly, the project’s own team also runs algorithmic market making (leveraging their quant background) through HLP, aligning their expertise with the protocol’s liquidity needs. The combination of fee buybacks and LP incentives forms a closed loop: traders pay fees -> fees reward LPs and buy $HYPE -> deeper liquidity and buy pressure -> attract more traders.

Spot Exchange Fees and Listing Auctions: In addition to perpetual swap fees, Hyperliquid introduced an extra revenue source with its spot market. New tokens looking to list on Hyperliquid participate in ticker auctions (HIP-1), essentially bidding for a limited number of listing slots. These auction proceeds (paid in $USDC) also flow into the Assistance/Insurance Fund to buy back $HYPE​. Recent auctions have fetched as high as $975,000 for a single ticker slot on the exchange, underlining how valuable access to Hyperliquid’s liquidity is becoming for projects. Once these tokens are trading, the spot exchange charges fees, and any fees collected in $HYPE (for example, half the fee on HYPE/USDC trades) are immediately burned from circulation​, creating deflationary pressure.

Altogether, Hyperliquid’s growing brand value and exclusivity are creating an additional premium in its spot markets. Unlike traditional CEX listings where projects pay hefty fees but don’t necessarily benefit from a strong network effect, Hyperliquid listings provide immediate exposure to a deeply liquid, engaged trading environment via HIP-2. Projects are willing to bid hundreds of thousands of dollars for ticker auctions not just for access to liquidity, but for brand alignment with a platform that is known for fast execution and community-alignment.

These value accrual mechanisms result in liquidity flowing within Hyperliquid’s own ecosystem, and earnings are passed down in their entirety not only to active traders and LPs, but also to long-term holders of $HYPE rather than to VCs or centralized entities. This creates a strong synergy where power users benefit from Hyperliquid’s community alignment while Hyperliquid achieves exponential growth from network effects.

HyperEVM & DeFi Legos

The launch of HyperEVM will transform Hyperliquid from being purely an exchange to also hosting its own DeFi ecosystem. Unlike traditional L1s that rely on third-party DEXs or fragmented liquidity hubs, HyperEVM integrates directly with Hyperliquid’s on-chain order book, meaning developers can build dApps that plug into deep, active liquidity from day one.

This chain-exchange fusion model unlocks entirely new possibilities: structured products that settle against live perps, algorithmic trading strategies that execute at CEX-level speeds but on-chain, and novel lending markets where collateral can be rehypothecated. Several projects are already building on HyperEVM, poised to leverage its infrastructure. For example:

• HyperLend: A native lending platform offering diverse lending pools, including options to use HyperLiquidity Provider (HLP) tokens as collateral, enhancing utility and income potential for HLP holders.
• Kinetiq: A liquid staking protocol where users can stake $HYPE to receive kHYPE, with a validator scoring system that incentivizes optimal performance and reliability.
• Silhouette: A decentralized trading environment providing private transaction execution on Hyperliquid, utilizing advanced privacy technologies to protect trading strategies and prevent frontrunning.
• HyperdeltaX: A native options platform aiming to expand the range of financial derivatives available within the Hyperliquid ecosystem.

Hyperliquid has also introduced support for native spot assets like $BTC, $ETH, and $SOL through Hyperunit. For the chain exchange fusion vision to work, this is important because it allows users to natively access majors without the need for bridging. Native spot asset integration then allows developers to create on-chain structured products, lending/borrowing markets, and new primitives on the HyperEVM directly, which helps to expand Hyperliquid’s use case beyond trading.

There is also a good chance that this opens up the doors for institutional investments. Currently, most funds are not involved in $HYPE due to mandate limitations, primarily because even though $HYPE is a DEX, its current design—where trade execution, custody, and liquidity provision are controlled within a vertically integrated system—makes it more like a CEX. Launching the HyperEVM makes the $HYPE investment more like an infrastructure L1 asset with a native DEX rather than purely a CEX-like DEX.

The Final Form

Unlike other Perp DEXs that rely on external networks with high gas fees, slow execution, and fragmented liquidity, Hyperliquid built its own high-performance L1 from scratch, making it the only DEX that can truly match CEXs in speed, liquidity, and execution. And now, with HyperEVM on the way, it’s expanding even further, not just competing with CEXs, but taking on Ethereum, Solana, Sui, and other Layer 1 powerhouses.

In an industry where the biggest value accrual goes to exchanges and Layer 1 blockchains, Hyperliquid is the only project that competes on both fronts simultaneously. It’s not just another Perp DEX, and it’s not just another Layer 1. It’s the only project in all of crypto directly challenging both CEXs and L1s on the same battlefield. What Binance tried to bridge with a CEX and the BNB chain, Hyperliquid fuses at the atomic level. When Binance users want to tap DeFi, they have to bridge out. When Hyperliquid traders want to leverage their positions in DeFi, it’s already there.

In addition to that, Hyperliquid operates in a more agile, on-chain environment, allowing it to list high-volume coins faster than CEXes like Binance and Coinbase. A recent example was $TRUMP, which was listed within 3 hours of its launch and did almost 50% of the volume of Tier 1 exchanges like Binance when it finally launched there. Other examples include $VINE, $JELLY, $KAITO. This allows Hyperliquid to capture a lot of volume from users trading these high-demand coins and thus generate more fee revenue.

Similarly, following the BSC-Binance playbook, projects launching within the HyperEVM ecosystem have a major incentive of having a pathway to being listed on Hyperliquid and accessing deep, organic liquidity which drives early price discovery.

The Breaking Points

Hyperliquid’s network is still young and has been run by a very small validator set. Recently, only 4 validators (all run by the team) were validating, which raised serious concern. Although they’ve expanded to 16 validators now, the Hyper Foundation’s nodes still control ~80% of stakes.

This means the chain is effectively permissioned by the team’s influence. There is a key-man risk here if the team members were compromised (insider or external attack) while control is so concentrated, which could undermine or even halt the network. Failure to add more independent validators poses a huge risk to the HyperEVM as it scales larger. Ideally, no single entity should own over 50% of the stake to prevent compromises.

Much of Hyperliquid’s goal with launching HyperEVM is to expand beyond an exchange into a broader ecosystem. There is a risk that this doesn’t materialize if developers or projects don’t migrate to build on the HyperEVM or if the current projects that are building there fail to gain traction.

Maybe users indeed only use Hyperliquid to trade rather than engaging in DeFi. The invalidation criteria here is the lack of meaningful adoption of new dApps on Hyperliquid, either in slow TVL growth or lack of developer or project interest. This could then mean Hyperliquid is overvalued because, at the current price, the HyperEVM success is relatively priced in.

On top of that, we are in a heavily dispersed market where new narratives can cause selloffs of previously shiny coins. Recent revivals of DeFi ecosystems like Sonic are potential threats, as users seeking higher returns rotate their bags out of $HYPE and into more enticing 5-fig APY farms on Sonic, or chase memes or other tokens. If we do see a rise in DeFi activity again across upcoming chains like Monad or MegaETH, or current contenders like Base, Solana, Sui, etc. there is a possibility $HYPE falls short unless they develop their DeFi ecosystem on the HyperEVM equally fast.

Developing a successful exchange vs a successful blockchain are also two very different ventures that require completely different understandings of the market and users in those niches. On the CEX/DEX perp trading side of things, users are drawn to leverage and to trade long/short assets in hopes of beating the market, and Hyperliquid provides them with a cheap, fast, and great UI to do all these in a decentralized web3 ethos. They found PMF there thanks to Jeff’s background in high-frequency trading. But for DeFi, which is the pinnacle of every blockchain, there has to be some form of novel APY opportunity or primitive for users to migrate there and use it.

The Strike Points

As markets shift from momentum and attention-driven assets like memes to more fundamental-focused assets with strong revenue, narratives, and teams, the bet is that DeFi primitives and infrastructure assets will start to catch fresh bids from the slowly dying meme meta.

With the recent launch of the HyperEVM, the market has shown its hand that a successful HyperEVM launch had already been priced in at ~$26, thereafter having a correction to $22. Nonetheless, it is still well within the $20-26 range.

A good strategy would be to DCA at range lows (~$18-$21) and play a range breakout. Price has been consolidating at these levels for almost 2 months, allowing for a change of hands, distribution across more holders, and accumulation. A good exit could come from announcements of future community incentive distribution plans or bullish news regarding institutional buying. Ideally any form of news that creates a bullish reflexive price action and sells the news on the actual announcements or euphoric postings on X timelines.

The ideal scenario to see here is that HyperEVM continues to attract liquidity in terms of DeFi TVL, but also developer activity and projects launching or migrating to HyperEVM. Though this is likely priced in to be successful, any underperformance in TVL growth or stagnation in developer or project interest could result in bearish price action, as this could indicate HyperEVM being just another EVM-compatible L1 with low activity, thus making it overvalued at ~$25B FDV.

The Bottom Line

As the memecoin meta dies out, there has been a stronger demand now more than ever for fundamentally strong projects that can survive the volatility and chop in current market conditions. Hyperliquid remains one of the highest conviction bets for most people right now, and for good reasons. More than a short-term bet, it signals positioning.

From a fundamental level, Hyperliquid has strong value accrual mechanisms that flow back directly to token holders, as well as $HYPE buying pressure from the Assistance Fund and burning of supply. With the launch of HyperEVM, the exchange opens up its doors for an entire L1 DeFi ecosystem, which is likely to command a valuation premium on top..

While the tech-focused narrative aspect of Hyperliquid is enticing, and the current revenue generation outlets have been proven to work extremely well amidst the past 2 months where many of the weaker alts have bled against BTC, the crypto markets are still not as efficient as traditional stock markets where technology and fundamentals often prevail. The long-term bet on Hyperliquid is that as the market matures and institutional capital flows increase, projects with real revenue, deep market share, and proven execution will capture outsized valuation multiples.

With HyperEVM’s announcement already acting as a sell-the-news event, the key question now is whether there is still significant upside left at a $25B FDV valuation. While some might argue that a high FDV signals limited near-term returns, it’s critical to distinguish what type of supply unlocks are happening. Unlike typical insider unlocks that flood the market with exit liquidity, $HYPE’s unlocks are tied to community incentives, validator staking, and liquidity provision. On top of that, the supply is deflationary with $HYPE burns.

Ultimately, the question for investors is who the marginal buyer for $HYPE is at this stage. Venturing into an L1 ecosystem might be the solution to achieve the final L1 valuation premium and finally attract institutional buyers as $HYPE becomes an infrastructure asset. In that case, it will not be surprising to see upwards of $50-100B FDV.

Disclosures

Alea Research has never had a commercial relationship with Hyperliquid and this report was not paid for or commissioned in any way.

Members of the Alea Research team, including those directly involved in the analysis above, may have positions in the tokens discussed.

This content is provided for educational purposes only and does not constitute financial or investment advice. You should do your own research and only invest what you can afford to lose. Alea Research is a research platform and not an investment or financial advisor.