HYPE Could Triple If It Wins 1% Of Wall Street's Futures Transcript, AI Summary & Key Points

00:00 Crypto is still full of absolutely terrible  projects that do absolutely nothing and deserve to keep bleeding. But there are a few projects,  a few protocols, a few tokens which have actually been growing their user base, increasing revenues,  and driving that value back to token holders. And these are the projects which have been rewarded  in the last year, maybe even slightly longer.

00:29 This content is directed at persons outside  the United Kingdom. It is not directed at and must not be acted upon by persons inside the  United Kingdom. Nothing said on Risk Takers is a recommendation to buy or sell any token, asset, or  security. Views expressed by hosts and guests are solely their opinion and not financial advice.  Check the description for more information.

00:41 Hey guys, welcome back to the show. I'm Alessandro,  and today I'm going to be going through one thing I think everybody is getting wrong with  Hyperliquid, and it is the exact thing that's making them struggle to really value it because  there's no good looking at Hyperliquid and going, "It's overvalued because it's a perpetual DEX."  This is misunderstanding the playbook.

01:03 It's misunderstanding the vision. Rules and regulations  in the US are changing at a rapid rate. Perpetual futures in the US are now legal on certain places,  and the infrastructure that allows for these products to be traded is changing. President  Trump just last month announced Hyperliquid by name in a press conference. Let me show you that  quickly.

01:31 I understand that Mike is also working to bring Hyperliquid into the United States in a  fully compliant and legal fashion. It's working very hard on that. And what I want to answer in  this particular show is three things. Number one, why has HLP been the best performing token in  crypto over the last two years and probably the easiest hold? How expensive is it today?

01:58 And what  does it need to become to effectively justify its valuation today? Because at $90 billion, which  is effectively what it is in terms of FDV today, that's very expensive, but it depends why it's  valued like it is. No project is immune from poor tokenomics. We've seen this play out time  and time again. Cardano at the peak has bled out ever since because there were too many tokens to  come online and not enough demand to soak up those tokens.

02:38 Uniswap, Raydium, even Solana has suffered  from this problem. Continued unlocks which make growing the price so challenging but growing the  market cap pretty easy. So, this is HLP since the day it launched, right? It actually launched at  $2, but it closed at $6 on the first day. It's basically done a 50x since then. It's obviously  been a very, very good performer.

02:59 And the reason it's been so good is because traders pay a fee.  That fee gets routed back to the treasury. It buys back HLP on the open market and it's sent to  a burn address. It happens every single day, every single transaction, every single block. People  use the platform, and so far it's forced about 48 million HLP to be bought and burnt, which is today  worth about $4.5 billion.

03:26 Along the way as well, there's been a bunch of hacks that happened to  Hyperliquid in December. North Korean group Lazera tried to hack Hyperliquid. They failed. There  was the Jelly Jelly Squeeze, if you don't know what this was. Some nefarious actors basically  pumped a really tiny memecoin aggressively on the platform and tried to make some money out of  Hyperliquid.

03:51 It's happened a lot, and effectively they've been able to stave off all of the attacks.  What's actually made HLP go up in value? It's quite simple, really. They've bought back $1.3  billion of their token. They've pulled off 35 million coins out of circulation. Their user base  has 4xed, and they've been able to survive from eight very well-structured hacks on the network or  attempts to exploit value from the network.

04:14 Now, these are things that have to happen for anything,  any project, any crypto project especially, to survive. Hacks will happen. It is how the protocol  defends those hacks that matters. So guys, real quick, just want to tell you about today's  sponsor. This is a paid promotion for Kelshi. This content is directed at persons outside the United  Kingdom.

04:37 It is not directed at and must not be acted upon by persons inside the United Kingdom.  Kelshi is not an FCA regulated exchange and is not available to UK customers. You guys know Kelshi,  right? Kelshi are the world's largest prediction markets. However, now they do perpetuals as well.  So very on topic for today's video with respect to the CFTC. Kelshi are the first American  exchange the CFTC has ever approved to run perpetual futures.

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05:23 Back to it. When the token first launched, there were 330ish  million HLP tokens that were given out. Basically, all to people who used the platform via their  airdrop. Now, the question is very simple. Will there ever be more tokens in circulation than that  330 million? We're going to go through some bits today, but spoiler alert, I don't think there will  be.

05:49 This is a team that have done their absolute best to create a deflationary economic structure.  So more HLP tokens are pulled out of supply than are put into supply. 24% roughly of the token  supply is allocated to the team, and each month the team could claim about 10 million tokens.  This started back in November. They have only claimed about 5.8 million tokens.

06:15 So, ever since  November, they have only taken not even roughly 5% of the tokens that they could have taken. This  is not what normally happens with token unlocks. Token unlocks happen, and every month those tokens  go to the people that they're being unlocked to, and often they're sold. This is what keeps that  supply side pressure really high and makes it really hard for token price to appreciate.

06:43 And so  this is the big question. Hyperliquid currently has about 400 million tokens that are still in its  reserve that are there to reward or for community incentives, which is effectively airdrops and  incentive programs to try and increase volume, reward structures, and staking rewards. And so  only 17 million has been released, and that's from staking rewards only.

07:11 No airdrops ever since  the first one. No incentive campaigns have been launched ever since the first one. So there's an  enormous portion of supply that effectively the Hyperliquid Foundation have full control over  and can distribute however they see fit. So I really don't think these guys are going to just  distribute these tokens in a way that affects the tokenomics of the protocol.

07:36 And so in the case  of Hyperliquid, what if the token supply never surpasses that 334 million that happened on the  very first day? And then we can begin to answer, "Okay, well, is Hyperliquid expensive here?"  Because let me tell you, if Hyperliquid does unlock all of the tokens that are sitting there in  its tokenomics, then today it would be worth about $90 billion, which would make it roughly  the sixth most expensive token of all time.

08:11 Still behind Solana's peak of $175 billion,  still behind BNB's peak of $191 billion, but still behind Avalanche's peak and Cardano,  which never even had smart contracts at the time in 2021, of $140 billion. But still, $90  billion for a perpetuals DEX if all the tokens come online is still relatively expensive. And if  we look at Hyperliquid today, its market cap today versus some of the largest market caps in the  past.

08:38 This is not fully diluted. This is market cap only. We can see that actually it's still  ranked pretty high. Again, excluding Bitcoin, excluding Ethereum. Avalanche's market cap peak  was 32 billion in November 2021. Luna's was 42 billion before it collapsed to zero. The memes,  Shiba Inu was 49 and Dogecoin 96 billion. So to say Hyperliquid is expensive at $28 billion when  effectively it's behind two of the largest memes of all time by a considerable distance,  Polkadot, Cardano, and Luna and Avalanche, I don't think

09:24 is reasonable. Now, they might all  be overvalued. That's a reasonable statement. Hyperliquid is the number one money-making app in  crypto other than stablecoins, other than Tether and Circle. It's continued to be an enormous money  maker. It's continued to grow its user base. It's continued to grow its revenue streams, and it's  been doing that all while other chains have been getting better technology along the way.

09:49 And I  think really one of the biggest reasons it's been able to do that is because its tokenomics design  has been pristine. HLP is expensive at current revenues if you take into account staking rewards  and buybacks. Basically, HLP is pretty flat here. It's not really that deflationary. We need it to  double its revenues really to account for the fact that the token price has got so expensive because  just think about it this way.

10:17 The higher the token price goes, the less effective buybacks are if  their revenues stay the same. Pretty simple. If my revenue is $10 and a token is $10, I make  my revenue, I buy a token, I'm net neutral. If my revenue is $10 and a token price is $100, I can  only buy 10% of a token each time. So, more tokens are going to be coming into circulation, which is  a problem, and it's against what their continued deflationary tokenomics have been setting them up  for.

10:49 And so, Hyperliquid needs to be thought of in a slightly different way. Is it an exchange? Is  it a blockchain? If it's valued as an exchange, you can see that it's actually overvalued  relative to its peers as perpetuals exchanges. If however you value it as a blockchain, it's well  underneath its peers, far below this waterline. Blockchains are valued much, much, much more  expensively on a price to revenue ratio than protocols are or than applications are.

11:19 But  still, Hyperliquid sits in the middle of these two things. And right now it's being valued  more so as a perpetuals exchange than it is as a blockchain. And this is where that update at the  start from Trump makes a difference, because the US has regulated perpetual futures in the US,  and this path is opening up, it looks like, to more and more players.

11:44 For Hyperliquid, that is,  Hyperliquid is infrastructure. It is a protocol. Hyperliquid cannot become CFTC registered, so  people that are building on top of Hyperliquid can become CFTC registered. Now, the way they do  this is they lock up half a million HLP, which is $50 million at today's price. They list their  own markets, and then part of every trade buys back HLP on the protocol, and part of every  trade goes to the company that launched the market.

12:17 It's split about 50/50. And here are some  examples. Kraken, the US exchange, are launching perpetual futures on Hyperliquid to US customers.  Hyperliquid have launched a special kind of, it's called HLP three-star markets, that US  customers can access via a regulated institution, Kraken being one of them. So Kraken gathers the  US customer, and through a series of processes, that customer can trade on Hyperliquid using  the infrastructure that Kraken in this case have built.

12:53 Coinbase has it too. Coinbase via their  app allows you to trade Hyperliquid. It's a little bit different. The Kraken thing that Kraken  are doing is kind of like the next level up, because fundamentally they're providing new  markets to Hyperliquid. They're not just providing the same markets to a different audience. Now,  this just all sounds like a bit of jargon, but it's important to understand because what you  need to grasp is that generally liquidity begets liquidity.

13:22 The more traders, the more volume,  the more liquidity that a market can have, the more traders can use it, the more regulated  institutions that can trade on a market, the more volume it's going to have. So, CME,  which is an enormous futures market, the Chicago Mercantile Exchange, is kind of like the gold  standard, if you will, for futures markets.

13:48 They have everything. They have oil, gold, crypto,  stocks, indexes. They have basically every futures contract, forex contracts. Anything that is  tradable is tradable on CME. And currently, Hyperliquid trades about 4% of CME's volume at  most. It's hard to know what CME's true volume is, but it's at least a quadrillion dollars a year.  A thousand trillion a year.

14:15 An enormous, enormous figure. And so what we saw in the past was that  when the US regulated Bitcoin futures contracts, it increased the pie of both onshore Bitcoin  futures contracts and offshore Bitcoin futures contracts. So when CME came into this market back  in 2018, it increased the market overall. And this is the question. If Hyperliquid is regulated in  the US, which it looks more and more likely it will be, will total volumes of everything, oil,  stocks, crypto, forex, will it increase?

14:51 And will it increase by 1% or 10% or more? Because you  could argue case one, Hyperliquid comes online, and all that happens is the total volumes that  exist today stay the same, or because an entirely new venue opens up because it's offering a  different product. Perpetual futures are different to contracts that have expiry dates every quarter  because there's funding.

15:22 So institutions can hedge positions slightly differently. They can earn  funding because arbitrage begins to appear between the two exchanges and because liquidity  is deep enough for massive, massive players to capture that arbitrage. What if the arbitrage is  only 0.02%? If the volumes are high enough and the fees are low enough, it's worth them capturing  that arbitrage.

15:49 Now this might mean that total volumes increase. So, will Hyperliquid plus CME  effectively grow the pie? And so, in this table, I've mapped out a few different options. Pause the  video, take a little time to look through it. This absolutely doesn't mean anything necessarily.  There's no evidence that this is going to definitely play out. This is pure thinking about  where the world is going to be in one year, two years, etc.

16:20 Because this is how you invest. You  think about where things are going. You skate to where the puck's going, and you don't play where  it is today. So if Hyperliquid is able to capture some portion of CME's volume, and the CME grows  in its volumes overall, it would be reasonable, I think, to say that overall volumes might  increase by 10%, and Hyperliquid captures 1% of that volume.

16:44 So CME still has 99%, Hyperliquid has  1%. This would increase revenues to $2 billion, which is obviously a big increase. Now the numbers  get absolutely bonkers if Hyperliquid are able to capture 5% of CME's volume or 10% of CME's  volume, meaning $30 billion a year going back into the token would obviously mean that basically  all the circulating supply of Hyperliquid would be bought back at today's price.

17:09 And so these are  the markets Hyperliquid is trying to go into. So when people think about Hyperliquid and they put  it into this bucket here against other perpetuals exchanges, it's way overvalued at $90 billion.  But if it's key infrastructure that underpins a new financial system that increases regulated  futures across the board, this is a very different thing.

17:32 I'm not telling you which one exactly it  is. I don't know which one it is. I'm just saying these are the ways you need to think about  what the protocol is trying to become. Now, you might say the vision isn't going to happen.  That's totally reasonable. And there are a lot of things that would prove this thesis wrong. Number  one, the team starts selling.

17:47 If the team started dumping all their tokens, it would not be very  deflationary, and it would take an enormous amount of revenue to overcome that selling. It wouldn't  be good if less money started reaching the token, and that wouldn't be ideal. Right now, 99% of  Hyperliquid revenue buys the token. But in total on the platform, that's about 75% of all volume  on the platform reaches a buyback.

18:08 If the reserve started paying for growth, well, it depends if  there was ROI on that growth. If 1% of the token supply was used to incentivize platform volume on  the platform, maybe that would increase revenue enough to offset the billion dollars that it would  cost. If they suddenly launched 10% of the supply as an incentives program, would their volumes  increase to offset $10 billion in the first year?

18:44 Almost certainly not. But the main thing that  would really make the bear case for Hyperliquid is what if these names don't arrive, and what if  they arrive and it's really underwhelming? What if the Hyperliquid market that launches just  doesn't get any volume? That's a real chance. What if the Kraken product that's launching  gets no volume? There's a real chance.

18:59 Loads of perpetual futures platforms do not get much  volume. It's really hard to generate volume. The infrastructure can be built, the products  can be created, you have to have users. So you have to see users coming, trades being made,  big institutional players having demand for those products. And if there's not, well,  the bull case is over. So fundamentally, what Hyperliquid is worth is a direct proxy  to what it is.

19:30 Is it just a trading app? Is it core infrastructure that other large  players with large clients end up building upon? We don't know yet. The only player that's  built anything on Hyperliquid so far, really, is Trade XYZ, and they've done an incredible job.  They brought perpetual futures for individual stocks. Hyperliquid was the place to trade silver  when silver was incredibly hot.

19:58 Hyperliquid was a place that paid oil when oil was incredibly hot  during closed hours. They are absolutely making strides to achieving this core engine, this core  infrastructure, but they're not there yet. So, you have to see where it goes. Obviously, just to  end, crypto is incredibly risky. I am not giving you any advice here. I'm just displaying research  about how I'm thinking about Hyperliquid moving forward.

20:27 It's a very high-risk investment. You  should not be expected to be protected if anything goes wrong. And in fact, things always go  wrong. Just look at the BitGet hack this week. This stuff's so risky. So, don't expect to  be in a risk-free place. But this is all I wanted to get across. Hyperliquid is a different beast.  People are struggling to understand what they are building because they keep the cards so close to  their chest.

20:49 I remember telling people at like $5, $10, "This is not a perpetual DEX. This is this,  this is that." And people said, "You're an idiot. Wait until they get their first hack." Eight hacks  later, they've been absolutely fine. Doesn't mean to say that the next hack doesn't take the entire  thing down. Maybe it will. Maybe the Arbitrum bridge gets hacked because there are a load  of things that could go wrong.

21:10 But personally, if you ask me what I think, I think Hyperliquid  is effectively the greatest token that's ever been created in crypto. If something comes and captures  that crown, fair enough. Maybe it's no longer the greatest, but that's just my very biased, very  one-sided opinion. You guys should absolutely berate me for it. Let me know what I'm missing.  What do you think? That covers it for today, guys. Thank you all so much for watching. I  shall see you in the next one. Ciao, ciao.