Hyperliquid: A little-known dark horse

Author: yihang; Source: Author's Twitter @Yihang69

In the field of cryptocurrency, many projects rely heavily on hype, airdrop expectations, and even spend huge sums of money to subsidize trading volume to gain attention (youKnowwho).

But Hyperliquid is different. They do not do any publicity, have never accepted any financing from venture capital (no performance pressure), and do not rely on subsidies to attract trading volume. With strong products alone, they can surpass many competitors.

1.Why not raise funds?

Because they have very strong profitability! Hyperliquid has been making money since day one, and it is very profitable! And because the team size is relatively small, and the members all have the background of top high-frequency quantitative teams, they can make the project bigger and stronger without relying on external help.

Second, what exactly is Hyperliquid?

Hyperliquid is not only a decentralized perpetual contract exchange (on-chain contract trading), they also have a fast-growing spot market and actively embrace meme culture (Hyperliquid's iconic meme: "purr"). They are also actively developing their own L1 public chain.

Third, why do we need a new public chain?

Because Hyperliquid hopes to create a "pure on-chain order book" optimized for "high-frequency trading" (HFT). Hyperliquid L1 focuses on low latency and high throughput, which requires a high-performance and reliable public chain, which is not met by the current L1 and L2. In addition, the existence of block space and gas fees will greatly compress the profit space and efficiency of high-frequency trading. Therefore, a CLOB (order book) exchange designed for high-frequency trading is the only solution.

Fourth, why is the "pure on-chain order book" necessary?

In short, it is to achieve "more trustless, fairer, more open, and more transparent".

Currently, mainstream exchanges use "off-chain order books", which gives the exchanges themselves "absolute advantages". They can preempt your transactions, reject orders, and impose risk control restrictions, and use various methods to gain benefits from users.

Give two examples of centralized order books:

1. In 2022, Cointelegraph published an article stating that Alameda has "unfair advantages" on FTX, including faster order execution and that Alameda's positions will never be liquidated (no explosion).

2. The "Payment for Order Flow" problem in the stock market: Market makers pay brokers for "order flow". When you place an order in a securities account, the broker will give your order to the market maker to decide whether to trade at their quote or put the order on the open market.

This is the disadvantage of a centralized order book, full of opacity and unfairness. Users also need to unconditionally trust that they will not profit from it.

V.How does Hyperliquid's "pure on-chain order book" solve these problems?

By running the entire order book on the chain, all transaction executions are public, transparent and verifiable, thus avoiding the above problems to a certain extent.

VI.Why is it "to a certain extent" rather than completely avoided?

Because all L1 public chains have a problem: MEV (maximum extractable value). Simply put, miners on the blockchain may charge "bribes" to reorder transactions on the chain. But visible problems are always easier to prevent than invisible problems.

Seven,Hyperliquid's long-term goal:

Hyperliquid is not just a decentralized contract exchange. They use contract trading as a starting point and focus on derivatives trading to build a huge on-chain financial empire (similar to the reincarnation of Binance or FTX on the chain). I believe this is also the reason why their points issuance weight has gradually shifted from mainly contract trading to mainly spot trading. They hope to develop more financial applications on Hyperliquid.

Eight,Expectations for DeFi innovation:

I am very much looking forward to the innovation that Hyperliquid will bring to DeFi. Just like what @kiki520 eth said, the AMM model is just a product of the limitations of the times, and its capital efficiency is far inferior to the order book model, and the on-chain order book is the ultimate form of DEX. I agree with this.

When a truly decentralized and efficient on-chain order book appears, it may give rise to many interesting innovations:

1. Projects similar to Ethena:Build a basis vault based on "native assets" on Hyperliquid without relying on centralized exchanges.

2. High-performance decentralized options trading market:Further extend various structured products. As we all know, the structured products of centralized exchanges are heavily "commissioned", and I think more value should be returned to users.

Ninth,Strong community support:

Hyperliquid has strong community support. Many users changed their usernames to xxx.hl to express their support and confidence in the platform. For example:

jeff.hl @chameleon jeff

steven.hl @stevenyuntcap

茶不思.hl @mdzzi

10. How to capture value in advance before Hyperliquid issues coins?

I personally think there are three ways:

1) Invest in its iconic meme coin "purr": optimistic about its growth potential.

2) Inject HLP: This is a market-making robot on Hyperliquid. Simply put, it is betting against users or "being the banker".

There is one thing that is worth noting. As long as the strategy is "profitable in the long term", when the strategy retreats, this will be a very good opportunity to increase your position in HLP.

The logic will not be explained here. You can go to my boss @AnsonTradveller’s post https://x.com/AnsonTradveller/status/1827248428184912383

3) Buy Hyperliquid Point: Expect the price to rise when the coin is issued.

In fact, I think buying Hyperliquid Point is the best way to capture the value of Hyperliquid because these points directly correspond to tokens, the more points = the more tokens and the current market is also optimistic about Hyperliquid point

The following is the price trend of Hyperliquid point, which is a very healthy upward trend

Eleven, I have a small point of view:

Since Hyperliquid does not rely on any venture capital (and therefore does not need to allocate shares to investors), and the team itself is extremely profitable (very profitable), they have every reason to increase the airdrop ratio of points. According to my conservative estimate, at least 15% of the token allocation will be used for points airdrops, and my optimistic estimate is that the airdrop share may rise to 30%.

According to Messari's report, the market's valuation of Hyperliquid points appears to be "too conservative". Combined with their valuation model,

I think the reasonable price of Hyperliquid points should be between $5 and $14.

https://app.bubbly.finance/swap @Bubblyfinance to trade. They currently have the most liquid Hyperliquid points trading market on the market, and it is very simple to operate. You just need to go to their interface https: app.bubbly.finance/swap , select Hyperliquid Point and click the swap button, just as convenient as trading on Uniswap.

If you think the fees are high, you can try more advanced operations. Set a very narrow LP range below the current price and use it as an order similar to a "limit order" or equivalent to DCA buying Hyperliquid Point. When the price falls below this range, withdraw LP and all your assets will become Hyperliquid Points. You will earn LP income and save fees.

Twelve. Summary:

As a trader and DeFiMaxi, I have full confidence in Hyperliquid. With solid products and unique vision, they are leading a new wave of decentralized exchanges. In the current market environment, truly valuable projects will eventually be recognized. Perhaps now is the best time to participate in Hyperliqui's growth.