How HYPE Surged on Hyperliquid’s Growing Perpetual Futures Stardom

HYPE, the native token of Hyperliquid, was a standout performer among altcoins in May, as traders flocked to the decentralized exchange’s perpetual futures offering, according to a report published by asset manager Grayscale on Monday.

HYPE was recently changing hands around $37.72, a 14% increase over the past day, according to crypto data provider CoinGecko. Over the past 30 days, the token’s price has soared 80%. HYPE reached an all-time high of $39.68 just over a week ago.

“Hyperliquid has seen consistently high organic usage and robust liquidity and should increasingly compete with centralized derivative exchanges like Binance and Bybit,” Grayscale’s analysts wrote, emphasizing Hyperliquid’s recent jump in market share.

For years, the perpetual futures trading market has been dominated by centralized exchanges, which primarily operate outside of the U.S. Although Hyperliquid’s services are off limits in the U.S., exchanges like Coinbase are trying to get perpetual futures off the ground.

Futures contracts allow a trader to speculate on an underlying asset’s price movements. Unlike traditional futures contracts that have a fixed expiry date, perpetual futures can be held indefinitely, as long as a trader maintains the proper margin requirements. 

Perpetual futures often support high amounts of leverage, as traders effectively borrow funds to amplify returns. However, traders risk losing margin that serves as collateral for borrowed funds. Hyperliquid is taking a product that’s popular among crypto-native traders and leveraging smart contracts, as a decentralized exchange, to try and make the service’s plumbing transparent.

In May, Hyperliquid’s HyperCore product generated 80% of on-chan trading volume for perpetual futures, according to Grayscale. That translated into $17 billion worth of perpetual futures trading volume for HyperCore, the analysts wrote. 

Since the platform debuted late last year, it has supported $1.6 trillion in cumulative perpetual futures trading volume, according to crypto data provider DefiLlama. Hyperliquid’s network facilitated $250 billion worth of perpetual futures trading volume in May, data shows.

For comparison, the Solana-based Jupiter Perpetual Exchange came in second by perpetual futures trading volume last month, generating $20.5 billion, according to DefiLlama.

In recent weeks, activity on Hyperliquid has become an industry-wide spectacle, primarily because of highly leveraged bets made by the pseudonymous trader James Wynn. Although he once commanded a $1 billion Bitcoin bet, the trader was recently liquidated, losing $100 million. 

He has since began soliciting donations on X, formerly Twitter, generating further engagement. However, it appears that the associated X post has recently been deleted.

Critics say that some of Hyperliquid’s recent decisions chafe against the permissionless ethos of decentralized finance, or DeFi, including a coordinated effort to delist a surging meme coin that could have caused some users losses. Its low validator count has also raised eyebrows.

In November, Hyperliquid doled out 310 million HYPE to early users. The airdrop, while it was initially valued around $1.6 billion, would be worth $11.7 billion today, based on current prices.

Although many projects face headwinds in terms of user engagement after giving out tokens for free, as so-called farmers cash in and move on, Hyperliquid has been able to forge a stronger community in a sustainable way, according to Messari Research Analyst Matthew Nay.

“The wealth effect created this community that is super tight-knit, and it’s built around good tech,” he told Decrypt, adding that the service appeals to “the true, speculative, leveraged long traders that crypto loves to breed.”

Edited by James Rubin