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Hello readers,
Despite deteriorating fundamentals across volumes, fees, and hyperEVM users, HYPE continues to outperform, trading just 17% off its all-time high now 9+ months into the latest crypto winter.
Which begs the question:
Is HYPE now garnering an “L1 premium,” making it significantly undervalued relative to SOL & ETH?
Or does the increasingly competitive Perps market, regulatory risks, and lack of robust user growth render HYPE overvalued today?
We explore in this week’s edition of The Watch List.
*Please note that you can click the data citation note under each chart to access the supporting dashboard for this week’s report.
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Over the last 90 days (through 7.12.26), the Hyperliquid Perps DEX generated $142.7m in user fees — down 5% vs the prior 90 days, and 19% y/y.
For reference, Ethereum generated $88m in REV in Q2. Solana did $51m. And Pump Fun did $71m in user fees.
Of the $142.7m in user fees generated over the last 90 days, 97% ($138.1m) was used for HYPE buybacks.
While HYPE has been one of the best-performing crypto assets in the current bear market (down 17% from its ATH), user activity and fees remain indicative of bear-market conditions (down roughly 65% from peak levels).
In fact, HYPE’s fully diluted price/sales ratio is currently near all-time highs (77x fully diluted). That’s an odd development in a bear market, when we typically see valuations drop faster than fundamentals.
More on HYPE’s valuation later in the report.
Open interest is currently $11.1b, down 28% from all-time highs, but up 34% over the last 90 days.
33% of the total open interest is currently held by HIP-3 DEXs, with Trade XYZ accounting for 99.7% of that share. More on HIP-3 later in the report.
In terms of open interest amongst Perps DEXs, HYPE currently has a 78% market share. If we expand to all Perps exchanges (including CEXs), HYPE currently has a 16% market share. Both are at all-time highs.
The leading CEXs by Perps open interest are Binance ($23.6b), Bybit ($9.7b), and Gate ($8.9b).
For reference, Lighter currently has $880m in open interest (8% of Hyperliquid).
Over the last 90 days, the Perps DEX is averaging $7.1b in volume/day, down 0.3% q/q and 0.4% y/y.
33.8% of the volume came from BTC trading, 32.8% from RWAs (commodities, oil, stocks), and 11.9% from ETH trading. HYPE and SOL trading accounted for roughly 11.6% of Perps DEX trading volume over the last 90 days.
HIP-3 DEX volumes account for 33% of total volumes over the last 90 days, with Trade XYZ owning 96% market share amongst HIP-3 DEXs on Hyperliquid.
Across all Perps exchanges (CEX + DEX), Hyperliquid currently has a 6% market share in terms of trading volumes.
For reference, Lighter averaged $1.32b in daily trading volume in Q2 (18% of Hyperliquid).
Bridged capital into Hyperliquid is currently at $375.4m, down 94% from an all-time high of $6b.
Over the last 90 days, the Hyperliquid/Arbitrum bridge has seen $3.15b in capital leave the bridge.
With that said, stablecoin supply on the HyperEVM reached $5.8b in Q2, up 227%. As such, bridged capital is now staying within the HyperEVM, rather than leaving the network.
Total active addresses on Hyperliquid averaged 51.2k/day over the last 90 days, up 10% q/q and 103% y/y.
Despite Hyperliquid’s success, there is still a relatively small (yet sticky) number of core users driving network economics.
Launched in October of last year, HIP-3 lets third parties build their own perpetual DEXs on Hyperliquid, with separate order books, margin systems, and market settings, while still using Hyperliquid’s underlying infrastructure.
“Exchange as a service” for anyone who wants to offer perps trading on any assets.
Economically, the 3rd-party deployer monetizes the venue through a share of the trading fee. Hyperliquid takes a fixed 50%, with user fees on HIP-3 DEXs set at 2x the usual validator-operated perp fees on the core Hyperliquid Perps DEX. Therefore, Hyperliquid still earns the same fee on HIP-3 trades as on the core Hyperliquid Perps DEX.
HIP-3 volume averaged $2.3b/day over the last 90 days, up 30% q/q.
This accounts for 49% of the average daily volume of the core Hyperliquid DEX over the last 90 days.
Trade XYZ currently has a 96% market share amongst HIP-3 DEXs.
Over the last 30 days, Oil Futures made up nearly 3.4% of trading volume on HIP-3 DEXs. Silver futures accounted for 4% of volumes, Gold was 1.3%, and the S&P 500 was 9.4%.
Total Open Interest on HIP-3 DEXs is currently $3.71b (33% of the core Hyperliquid DEX), up 80% over the last 90 days.
Trade XYZ currently has a 99.7% market share in Open Interest amongst HIP-3 DEXs.
Total unique traders on HIP-3 DEXs averaged 34.5k/day over the last 90 days, up 31% q/q.
Trade XYZ currently has a 93% market share amongst HIP-3 DEXs in terms of unique traders.
Launched in February of last year, the HyperEVM is an Ethereum-compatible execution layer of the Hyperliquid blockchain. It's designed to allow an ecosystem of applications to be built “on top” of the liquidity and user base established by the Hyperliquid Perps DEX.
If successful, it could compete with larger L1s such as Solana and Ethereum.
Base fees + priority fees are burned, accruing value to HYPE users. HyperEVM validators are compensated purely on new HYPE issuance.
Total REV on the HyperEVM was $2.35m over the last 90 days, up 27% q/q, and 24% y/y.
These fees (base + priority fees) are burned, accruing value to HYPE holders.
The HyperEVM averaged just 10.6k active addresses/day over the last 90 days, up 5% q/q, but down 23% y/y.
The question moving forward is whether or not there is durable demand to build non-perp-related applications on Hyperliquid. The jury is still out on this.
Stablecoin supply on the HyperEVM is currently $5.8b, up 227% q/q.
The growth can be attributed to USDC deployments, which account for 96.8% of stablecoins on HyperEVM.
Tether has $127.7m in stablecoins on the HyperEVM, accounting for 2.2% of the market share.
The HyperEVM averaged roughly $1.32b of stablecoin volume/day over the last 90 days, up 155% q/q.
USDC accounts for 80.6% of the volume, with Tether accounting for 16.8%.
For reference, Ethereum generated $81.1b stablecoin volume/day in Q2. Solana generated $17.3b in stablecoin volume.
Max Supply: 1,000,000,000
Released Supply: 409,368,017 (40.9%)
Circulating Supply: 222,445,714 (22.2%)
Genesis Airdrop: 31%
Future Emissions & Community Rewards: 38.88%
Core Contributors: 23.8%. Unlocks began in November 2025 and end in November 2027. More on unlocks below.
Hyper Foundation Budget: 6%
Community Grants: 0.3%
HIP-2 (Hyperliquidity): 0.012%
As noted, Hyperliquid used 96.7% of its user fees for HYPE repurchases over the last 90 days ($138.1m)
In addition to programmatic buybacks funded by user fees on the core Hyperliquid Perps DEX, HYPE is now being burned via HyperEVM (though this is immaterial due to low usage in its nascent stage).
Over the last 90 days, the protocol has issued 2.4m HYPE to validators as compensation for securing the network (network inflation). This was offset by 2.5m HYPE buybacks, resulting in net issuance of -145.4k HYPE (deflationary).
We believe this is currently the strongest token economic structure in crypto. When you combine it with the fact that there are no early investor unlocks (HYPE has no VCs), it’s even better.
Core contributor unlocks began in November 2025 and end in November 2027. 34% of the total allocation is currently unlocked, with 9.9 million HYPE unlocking per month ($664m/month at the current HYPE price of $67).
The key question regarding future unlocks outside the core team concerns the 38.88% allocated to “future rewards.” It’s currently unclear if/when these tokens will be used for growth, if at all.
HYPE’s fully diluted p/s ratio (based on trailing 365-day fees) is currently 78x, and up 71% q/q.
As noted, it is odd to see a crypto asset’s valuation rise relative to its fundamentals in a bear market. We typically see the opposite, especially in the first half of a bear market (when 365-day look-backs show market conditions were stronger).
For reference, HOOD currently has a p/s ratio of 22.3x. PUMP is currently trading at a P/S ratio of 2.8x.
If we price the network based on the circulating market cap, the p/s drops to 18.2x (PUMP is 1.3x based on the circulating market cap).
HYPE’s buyback yield (based on FD market cap) is currently 1.17%, down from a peak of 4.1%.
Again, this shows that HYPE’s buyback yield (fundamentals) is declining relative to the network’s fully diluted value.
If we base the yield on the circulating market cap, it jumps to 3.9% (down from a peak of 13.5%).
The chart speaks for itself. HYPE has outperformed BTC since the token launched in late December of ‘24.
It’s up 69% vs. BTC over the last 90 days and 453% since inception.
Again. This is somewhat of an outlier compared with what we typically see in bear markets.
HYPE is down 72% vs. LIT over the last 90 days, but up 419% since LIT began trading in early ‘26.
HYPE is currently trading well above its 50 WMA. In fact, it dipped below for less than two months in the current bear market. Again. This is somewhat of an anomaly across the crypto ecosystem (ZEC is another asset that has not dipped under its 50 WMA in the bear market).
Valuation. We think HYPE may still be overvalued relative to fundamentals — largely due to the attention the token has received via RWA perps activity in the bear market (commodities, oil, and stocks such as SpaceX).
Competition. While HYPE controls market share among crypto-native DEXs, it still accounts for just 6% of trading volume on CEXs. In fact, Coinbase’s Perps product did roughly the same volume as Hyperliquid over the last year. Further competition exists among top CEXs, with Robinhood now entering the market through its integration with Lighter and Arcus (a Robinhood-native perps DEX on the Robinhood chain, built in partnership with dydx).
Regulation. Given that Hyperliquid’s flagship product provides access to highly leveraged futures, it puts it closer to the part of the financial markets that regulators traditionally supervise most aggressively. The question is not whether Hyperliquid could be shut down. But rather, how much of its trading volume could be impaired if trading interfaces require KYC, as on CEXs. This risk applies to all Perps DEXs.
Attention has thus far consolidated around HYPE in the current bear market (rightly so). However, fundamentals are declining relative to HYPEs valuation.
The question for investors is whether HYPE’s “re-rating” during the bear market was due to the asset being undervalued previously.
If that’s the case, the market may simply be catching up to:
The stickiness of its user base.
HIP-3 and HIP-4 growth (we’ll have more on HIP-4 prediction markets in future updates).
The potential of the HyperEVM as a competing L1 network (and the L1 premium that comes with it).
Sound token economics and protocol alignment with HYPE holders.
From this perspective, HYPE appears to be priced at a discount relative to ETH and SOL.
HYPE is currently trading 17% off its all-time high, and 30% above our “fair value” range.
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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.