Hyperliquid is a top-of-the-line product, but is HYPE still considered a "cheap" option?

Written by: Donovan

Compiled by: AididiaoJP, Foresight News

Hyperliquid is a world-class product. The team consists of only 12 people, generates $600 million to $800 million in revenue annually, has near-zero customer acquisition costs, and has returned over $1 billion to token holders through buyback mechanisms.

However, with a circulating market capitalization of $9 billion, does HYPE still have an attractive valuation? What kind of expectations do token holders have at this price level?

To answer the above questions, I used a reverse discounted cash flow model to clarify the current market's implied growth expectations for HYPE, and then used a bottom-up valuation method to cross-validate the actual potential size of the perpetual contract market.

Reverse Discounted Cash Flow Model

Assuming a 30% terminal growth rate over four years, HYPE's current market capitalization of $9 billion implies the following information.

First, under the baseline scenario (assuming a terminal P/E ratio of 15 and a net profit margin of 50%), Hyperliquid's revenue needs to grow to approximately $11.5 billion by 2030. This means that based on the current annualized revenue of $601 million, the compound annual growth rate over the next four years needs to reach 110%, a growth rate that significantly exceeds the normal range.

Such rapid growth is unprecedented in the development history of traditional financial exchanges. The Chicago Mercantile Exchange, Nasdaq, Intercontinental Exchange, and Chicago Board Options Exchange have all failed to achieve such organic, high-speed growth within a four-year period, even during their most rapid expansion phases. To be fair, the comparability between traditional financial exchanges and Hyperliquid may be limited due to regulatory and geographical constraints, a view that holds some merit. Binance, the closest comparable example, achieved a compound annual growth rate of over 200% between 2018 and 2021 and similarly enjoys the advantages of no regulatory restrictions and global market access that Hyperliquid currently possesses. However, for Hyperliquid to replicate this growth, it will still rely on extremely specific market conditions.

Secondly, the model requires the overall potential market size of perpetual contracts to expand at a rate exceeding that of any comparable market. Currently, the annualized trading volume of global perpetual contracts is approximately $95 trillion, with decentralized exchange (DEX) perpetual contracts accounting for about 10% ($7 trillion to $9 trillion). As of March 2026, Hyperliquid holds approximately 30% of the DEX perpetual contract market, corresponding to an annualized trading volume of approximately $2 trillion. For the baseline valuation to hold, Hyperliquid's trading volume would need to grow to $51 trillion annually (based on $11.5 billion in revenue divided by 2.25 basis points), approximately 25 times its current level.

Finally, such growth also requires Hyperliquid to maintain its dominant market share during this expansion. Given the intense competition in the perpetual contract market, achieving this assumption is highly challenging. Historically, different market leaders have dominated at different stages – GMX and Synthetix in 2021, dYdX in 2023, and currently Hyperliquid, demonstrating frequent changes in market leadership.

Dynamic changes in the market share of perpetual contracts on decentralized exchanges

Hyperliquid currently boasts a profit margin exceeding 85% and a team of only a dozen people, demonstrating exceptionally high capital efficiency. However, this high profit margin has also triggered new competitive pressures, with projects like Aster and Lighter emerging. Recently, Binance, Coinbase, and Kraken have launched equity and commodity perpetual contracts, directly entering the RWA perpetual contract market that previously drove Hyperliquid's growth. The distribution capabilities of centralized exchanges cannot be underestimated; these platforms possess hundreds of millions of verified users, a robust institutional sales system, and sufficient assets and liabilities to maintain competitive fee rates in the long term. Hyperliquid has corresponding countermeasures through HIP-3 and builder code mechanisms, but even in an optimistic scenario, its profit margin will face structural downward pressure as market share maintenance costs rise.

Overall, the reverse discounted cash flow model suggests that HYPE's valuation is too high at a market capitalization of $9 billion. The current pricing implies a market environment requiring unprecedented sustained revenue growth, a market size yet to be established, and a competitive advantage already threatened by rivals to maintain its position. While this scenario is not impossible, it should be considered a baseline scenario, not a tail scenario, for fundamentally driven investors to justify their current purchase.

Bottom-up valuation model

To more prudently assess HYPE's fair value, we employ a bottom-up valuation approach to explore the following questions: What market share can perpetual contracts capture in the global derivatives market, and what percentage of that market can Hyperliquid obtain?

The core advantage of perpetual contracts lies in providing investors seeking directional leverage with a simpler and more capital-efficient tool. They have no expiration date, require no physical delivery, and do not rely on brokers. By 2030, perpetual contracts are expected to attract significant trading volume from the following markets. According to Syncracy Capital's "mega-perpetualization" framework, the current sizes of major global derivatives markets are as follows:

US Options: Approximately $1,000 trillion annually
Global futures: approximately $938 trillion
Contracts for Difference (CFDs): Approximately $250 trillion
Crypto asset perpetual contracts: approximately $95 trillion (including centralized and decentralized exchanges)

Penetration rate assumptions vary across markets. We believe that CFDs are the most easily substitutable market because they also cater to retail speculative demand, while perpetual contracts have structural advantages, avoiding the opacity of over-the-counter brokers and counterparty risk. Substitutability in the options and futures markets is more difficult because institutional hedging users require expiration mechanisms and physical delivery, features that perpetual contracts struggle to provide. Furthermore, regulated futures exchanges possess customer relationships and compliance infrastructure that decentralized exchanges cannot replicate.

In summary, the baseline scenario assumes that by 2030, decentralized exchanges will account for 45% of the total perpetual contract trading volume (reflecting the ongoing trend of transaction execution migrating from centralized to on-chain), while Hyperliquid's share in this decentralized market is approximately 30%.

Under the assumption of a 2 basis point fee rate, Hyperliquid's revenue range in 2030 is projected to be between $4.7 billion (baseline scenario) and $14 billion (optimistic scenario).

Achieving the baseline scenario is feasible to some extent, but requires the simultaneous fulfillment of several conditions: the overall potential market size for perpetual contracts expands as expected; Hyperliquid maintains its market share; profit margins remain stable; and HyperEVM's annualized revenue grows from the current $800 million to $3 billion (implying growth from the HIP-4 forecast market). If any of these conditions are not met, it will fall into a pessimistic scenario that cannot support the current valuation.

in conclusion

In summary, the analysis results of both models show that the current market price of HYPE has largely reflected most of the positive factors, and the margin of safety is relatively limited.

In the baseline scenario, there is a gap of approximately 2.5 times between the $11.5 billion in revenue required by the reverse discounted cash flow model and the $4.7 billion derived by the bottom-up model.

Current prices can only be supported under an optimistic scenario, in which the bottom-up model projects $14 billion in revenue, significantly higher than the $5.4 billion revenue threshold of the discounted cash flow model. However, this optimistic scenario requires the simultaneous fulfillment of the following conditions: decentralized exchanges holding a 60% share of the rapidly expanding perpetual contract market; Hyperliquid maintaining a 45% share in this market; and HyperEVM revenue growing from the current $800 million to $3 billion.

It should be noted that the reverse discounted cash flow model is quite sensitive to the 30% yield assumption. If investors are willing to accept a lower yield requirement, the valuation conclusions will change significantly, as shown in the table below.

Under the 30% yield assumption, the baseline scenario indicates that the current price already reflects most of the expected value. Investors at the current price level are primarily capturing the potential gains from the right-hand tail scenario, for which they have already paid a relatively fair price.