Non-Traditional Public Chain: How Hyperliquid Supports a Billion-Dollar Valuation with "Perptual Futures AWS"?

In the current environment of cryptocurrency market bubbles and prevailing narratives, can Hyperliquid (HYPE) rapidly enter the ten billion market value club solely due to short-term hype, or is it based on the long-term value of its products and mechanisms? This article will start from the token economic model, combining a horizontal comparison with traditional finance and leading crypto projects, systematically sorting out Hyperliquid's current market performance and potential logic, and constructing a relatively complete valuation framework.

Since the first release of the HYPE valuation framework six months ago, many aspects have changed, but my optimism about HYPE remains unchanged. Let's take a look at some key data.

Income Estimate

One of the biggest challenges in assessing HYPE is how to make a reliable valuation of annualized income. Hyperliquid, as a rapidly growing early-stage startup, is in a cyclical industry where bear market trading volumes may be about 50% lower than in bull markets. I believe that Hyperliquid's rapid user growth, capital inflow, and other positive factors will be enough to offset the decline in trading volume during the bear market. The growth data from the past six months has confirmed this, with average daily income significantly rising.

Even if Bitcoin enters a bear market in the short term in the future, I believe the decline in trading volume will not be as severe as in the past, mainly due to the continuous inflow of ETF funds and the current friendly attitude of U.S. policies towards cryptocurrencies. Nevertheless, this is still a factor to consider, with revenue potentially decreasing by about 50% over the next few years. Therefore, we will conservatively use the average trading volume of the recent bull market ($3 million) as a benchmark, without considering growth factors.

In the calculation of valuation multiples, I examined the total supply of tokens from two dimensions: circulating supply and adjusted fully diluted supply.

The circulating supply is roughly equal to the amount distributed through airdrops, minus the portion destroyed through governance proposals and repurchases from the assistance fund.

In the fully diluted supply, 38.888% is reserved for future token releases and community rewards, 3% for community funding programs, 1.2% has been repurchased by the fund, and 0.1% has been destroyed through transaction fees. In the calculation, I excluded the repurchased and destroyed portions, as well as the unissued tokens for future releases/community funding.

Of the remaining uncirculated tokens, 23.8% is reserved for the team and future members, and 6.0% is reserved for the foundation. I have fully accounted for both portions in the adjusted supply, but this assumption is relatively conservative since the team is unlikely to sell or distribute these tokens in the short term.

The price-to-earnings ratio calculated based on 7 days of data is as follows:

• Calculated based on circulation volume is approximately 12.3 times
• Calculated based on the adjusted fully diluted supply, it is approximately 21.9 times.

I believe the most reasonable valuation benchmark should be between the two, referred to as the blended price-to-earnings ratio, which is approximately 17.1 times.

compared to listed companies

HYPE is currently priced relatively cheaply. When evaluating, it's important to consider the equity incentive (SBC) expenses of listed companies. The SBC of Coinbase, Robinhood, and Circle accounts for about 25% of adjusted EBITDA and has persisted for many years. These are not one-time issuances, but rather real, ongoing equity expenses.

To achieve a fair comparison, I propose two methods:

1. Use "LTM multiple (excluding SBC)" to compare the valuation of listed companies, while accounting for 100% of Hyperliquid's team token in the total supply.
2. Use "Mixed Supply Multiplier": circulating tokens plus 50% team tokens.

No matter which method is used, HYPE appears to be extremely attractive.

It is worth noting that the free cash flow profit margins of Coinbase, Robinhood, and Circle are significantly lower than that of Hyperliquid. This means that their EBITDA will shrink significantly when revenues decline, while expenses remain large. In contrast, Hyperliquid's free cash flow is "cleaner", more sustainable, and has stronger defensive capabilities.

In addition, Coinbase has 4,300 employees, Robinhood has 2,500 people, while the Hyperliquid core team has only 12 members.

HYPE's bullish expectations

Many people may underestimate the potential of HYPE. Perptual Futures is one of the largest markets in the crypto space, second only to stablecoins. Currently, Hyperliquid accounts for about 10% of the Perptual Futures market, and an even lower share in the spot CLOB market.

HyperEVM has just started. Various new types of Perptual Futures in the future will expand Hyperliquid from a "crypto Perptual Futures platform" to a "Perptual trading platform for global assets." Potential directions include stocks, pre-IPO private companies, prediction markets, foreign exchange, commodities, etc.

The traditional financial industry and the non-crypto sphere have not fully recognized the potential of Perpetual Futures. Once widely discovered, its impact will be immense.

Six months ago, Hyperliquid generated about $1 million in revenue daily. Now, this figure has stabilized between $2.5 million and $3 million, more than doubling. User and capital inflows have also increased correspondingly.

Currently, Hyperliquid accounts for about 5% of the trading volume of all centralized exchanges. If this proportion reaches 25% in the coming years, daily revenue could rise to 15 million dollars, and the free cash flow valuation multiple of HYPE would drop to 5 times.

compared to other cryptocurrencies

Comparing HYPE with other tokens is not entirely fair, as there are few truly comparable projects. Currently, some meme coin launch platforms with strong product-market fit and stable cash flow can be referred to, such as BONK, GP, PUMP, etc.

Traditional finance's focus

With the launch of Bitcoin ETFs, traditional finance is entering the crypto space on a large scale. HYPE, as a token that can generate substantial cash flow, has a sustainable moat, and possesses strong defensive characteristics, is likely to become an asset favored by traditional finance.

Although HYPE has not yet been widely recognized in traditional finance circles, mainly because the team has not conducted marketing, the launch of SONN could mark an important turning point. SONN has a reserve fund of $300 million available for purchasing HYPE and will promote HYPE alongside Paradigm and Galaxy Digital.

Token Distribution

Currently, HYPE has only about 150,000 holding addresses, which is relatively low. The main issue lies in the current distribution channels of HYPE not being smooth, making it difficult for ordinary users to purchase.

But the situation is changing. Although Coinbase and a certain trading platform refuse to list HYPE for some reasons, many front-end and fiat entry points are being built for Hyperliquid. Phantom has launched a Perptual Futures front-end based on Hyperliquid builder code, attracting 15,000 to 20,000 users within two weeks. These distribution networks may become important catalysts for HYPE.

Data Performance

Hyperliquid's various data performances are remarkable, ranking among the top in all cryptocurrencies. The user growth rate has reached a new high since the TGE, with accelerated capital inflow reaching historical highs, and the open interest has also reached historical peaks.

Compared to centralized exchange data: both trading volume and open interest are at or near historical highs. At the same time, SWPE (relative premium indicator) is at its lowest point since April, suggesting that the current price is attractive.

The driving force for the next round of growth

Key factors that may drive HYPE growth in the future include:

• Front-end distribution: The builder code is an important innovation of Hyperliquid, and the front end will also engage in marketing.
• Construction of fiat currency access: Multiple related applications or front-ends are about to be launched.
• HIP-3: A new product that could lead to significant token burns.
• SONN: Will introduce Wall Street capital, injecting $300 million buying pressure into HYPE.
• Spot collateral for Perptual Futures trading: may lead to increased trading volume, attracting Bitcoin whales.
• More spot assets will be listed: the team is continuously working to list top assets.

Summary

The current valuation of HYPE is still relatively cheap, and its potential may not yet be fully understood and appreciated by the market.