Source: Thor Hartvigsen

Compiled by Odaily Planet Daily (@OdailyChina)

Translator｜Azuma (@azuma_eth)

background

Since the launch of HYPE, Hyperliquid has seen significant growth in both trading volume and revenue.

HYPE was officially launched on November 29th, with an opening price of around $2, and experienced a sharp rise in December until it recently fell back (down about 34% from its all-time high).

What’s next for HYPE and Hyperliquid?

This article will deeply analyze the fundamentals of Hyperliquid and HYPE, explore HYPE's upside expectations, and analyze potential valuations based on transaction volume and revenue growth trends in 2025.

Trading volume data

While some expected trading volume on Hyperliquid to drop after the HYPE airdrop (as has historically happened on other derivative exchanges), the opposite has happened. Since then, trading volume on Hyperliquid has increased significantly, setting new highs of more than $10 billion in daily trading volume on multiple occasions.

The HYPE airdrop accounts for 31% of the total supply. It is expected that 42.81% of the supply will be available for future distribution and community rewards. Although it is foreseeable that part of the remaining share will be used for staking incentives and HyperEVM Layer 1 ecosystem incentives, the possibility that traders and HYPE holders will receive some kind of reward again without knowing it in the future is not zero.

At a price of $25, 42.81% of HYPE supply is equivalent to approximately $11 billion.

In addition to contract trading volume, Hyperliquid’s spot trading volume has also increased significantly since HYPE went live, with trading volumes of $250-500 million on most trading days.

Hyperliquid vs CEX

For a long time, I have been tracking the trading volume of Hyperliquid compared to centralized exchanges (CEX) such as Binance.

The bullish case for Hyperliquid involves market share growth as more users and volume start to move on-chain over time. Comparing Hyperliquid to Binance, it is clear that there is still a long way to go. However, as shown in the figure below, Hyperliquid's market share has shown a clear upward trend in December. Over the past two weeks, Hyperliquid's relative market share has been around 5-8%.

According to Coingecko, Binance’s recent daily derivatives trading volume is between $60 billion and $150 billion. However, these volume figures cannot be verified from the CEX end and need to be treated with caution.

Relative to Bybit, Hyperliquid’s market share recently reached 25% (peak data).

Fees and income

Contract Trading

Fees on Hyperliquid are paid by users who trade on the platform. Compared to other exchanges like Binance, Hyperliquid has lower fees, a move designed to incentivize more trading activity. For perpetual contracts, for most users, the fee for market orders is 0.035% and for limit orders it is 0.01%. The higher the trading volume, the lower the fee.

These fees are collected by the HLP market making vault, insurance fund, assistance fund (mainly responsible for repurchase), and some other miscellaneous addresses on Hyperliquid. The Hyperliquid team has not disclosed the specific distribution of platform transaction fees, so it is difficult to accurately estimate HYPE's repurchase data.

Spot Trading

The fees users pay on the spot market are used to buy and burn the specific tokens being traded. Not surprisingly, HYPE currently accounts for the majority of Hyperliquid’s spot trading volume. So far, HYPE’s spot trading fees have exceeded 100,000 HYPE (over $2 million at current prices).

Overall, this has no material impact on the supply of HYPE (at least not yet) compared to the buybacks from the rescue fund.

Spot Auction

Hyperliquid also generates significant revenue from spot auctions. At $500,000 per auction, Hyperliquid could earn an additional $141.29 million per year.

Rescue Fund and HYPE Buyback

While the details of the revenue distribution from spot auctions and contract trading are unclear, we can measure daily HYPE repurchase data through the assistance fund.

Two weeks ago, I published an analysis on X that analyzed the HYPE buybacks by the rescue fund within 48 hours. At that time, a total of about 151,000 HYPEs were bought back within 48 hours, which is equivalent to an annual buyback of about $686 million.

During those two days, Hyperliquid’s average daily volume reached $8 billion.

Valuation Framework

The upside outlook for HYPE heading into 2025 is a bet that Hyperliquid volumes continue to grow and that spot auction demand continues to grow, as this will lead to higher revenues for Hyperliquid, which in turn will amplify HYPE's buybacks.

A key reason for the growing volume on Hyperliquid is that Hyperliquid still has billions of dollars left for future rewards, which will make Hyperliquid a very profitable trading venue. Other potential catalysts include the spot listing of CEX and the launch of HyperEVM.

@fmoulin 7 once did a good analysis of HYPE’s potential valuation, assuming a price-to-earnings ratio (P/E) of 30, and corresponding HYPE price expectations for different levels of contract transaction fee income and auction income are as follows.

Odaily Note: For additional reading, please see (In-depth analysis of Hyperliquid: potential market opportunities and HYPE’s bullish logic).

Hyperliquid’s average daily volume over the past 14 days was approximately $4.89 billion, with auction prices of approximately $500,000.

Given this, we arrive at an estimate of $587.5 million in annual revenue for Hyperliquid, which, assuming a PE ratio of 30, implies a potential HYPE of $52.78. Note that this is calculated on a floating market cap basis rather than a FDV basis, as future unlocks are mostly tied to community incentives rather than internal group unlocks.

There are also two points worth noting: as of now, almost all of these revenues will be used to repurchase HYPE; and more and more HYPE has been pledged (currently about 25%), which effectively reduces the liquid supply.

All in all, if you believe that Hyperliquid trading volume and adoption will continue to grow, there are many reasons to be bullish on HYPE over the longer timelines.