Recent market sentiment toward HYPE has become noticeably more bearish. The main points of debate center on three issues: the supply pressure from ongoing team token unlocks, direct selling pressure from institutional unstaking and ETF outflows, and the platform’s excessive reliance on a single deployment party.
These three concerns appear separate, but they all point to the same root cause.
The team is unlocking, requiring continuous buybacks by the rescue fund to provide support; the funds for buybacks come from protocol fees; a large portion of these fees stems from the trading activity of HIP-3; and currently, almost all of HIP-3’s activity is concentrated on trade.xyz.
In other words, a significant portion of HYPE's value depends on the continued operation of this deployment party.
More notably, recent market rumors have emerged that trade.xyz is seeking funding at a valuation of approximately $1.5 billion, a signal that has prompted many to reconsider HYPE’slong- and medium-term valuation logic.
This article aims to answer: Has HIP-3 reached a dead end? What does this highly concentrated structure imply for the future development of HIP-4 and the medium- to long-term value of HYPE?
1. What happened with HYPE?
Let’s start with the price. HYPE peaked around mid-June at nearly $77, and since then has been trending downward in a volatile manner, currently retracing to around $56, a decline of approximately 25%.
Signs of selling pressure emerged as early as early June. On June 4, on-chain data showed that Arthur Hayes sold approximately 247,000 HYPE tokens, cashing out around $18.02 million, nearly liquidating his entire position. Just days earlier, he had publicly stated his belief that HYPE would outperform the top ten cryptocurrencies by market cap by the end of the year.
After entering July, institutional activity also increased. Multicoin Capital unbonded approximately 1.97 million HYPE tokens at the end of July, equivalent to about $108 million, and simultaneously transferred tokens to multiple exchanges. Institutions such as Selini and Bitwise were also observed transferring tokens to exchanges.
However, Selini founder Jordi Alexander responded that the transfer was not a sell-off, as multiple aspects of the ecosystem require HYPE, including staking for trading fees, wallets, market making and arbitrage on HyperEVM, and HYPE auctions. He also does not believe that Paradigm and Multicoin’s positions are being liquidated.
But the direction of capital flow is indeed changing. According to SoSoValue, the HYPE spot ETF has shifted fromcontinuous net inflows since its launchtothree consecutive weeksof net outflows in July,becomingthe only crypto ETFin Julyto experience net outflows.
Meanwhile, short positions in the secondary market are increasing, with renowned trader Loracle having raised their combined short positions in HYPE and ETH to over $46 million by early August, with the HYPE short entry price near $52.70.
During this adjustment, HYPE's sentiment has明显 deviated from the overall market trend. Is this merely a routine cyclical correction, or is there an inherent issue with HYPE's structure?
2. High concentration is already a fact.
According to DefiLlama data, Hyperliquid has recorded approximately $200.7 billion in perpetual trading volume over the past 30 days, with open interest of around $10.7 billion and an annualized protocol fee revenue of approximately $1.82 billion, making it one of the largest platforms in the on-chain perpetuals space today.
A significant portion of this has already come from HIP-3; according to the Dune dashboard, HIP-3 has generated over $480 billion in cumulative trading volume since its launch in October 2025.
According to Hyperliquid Research Collective (HRC)'s Q2 report, the share of HIP-3 in platform trading volume rose from 1.8% last year to 20.7% in the first quarter and 32.2% in the second quarter of this year.
And hl.ecodatashowsthat this ratio has recently risen further to approximately 64.6%, calculated as a 7-day moving average. This means that nearly half or more of Hyperliquid’s trading activity no longer comes from its official native markets, but from this open deployment mechanism.
Looking further inside HIP-3, the concentration is even more extreme. As of August 2026, TradeXYZ has deployed 103 markets, of which 88 are actively trading, covering commodities, foreign exchange, U.S. and Asian stocks and indices, as well as pre-IPO products including Cerebras (CBRS), SpaceX (SPCX), and Changxin Storage (CXMT).鑫存储 (CXMT).
TradeXYZ has a 30-day average daily trading volume of $3.7 billion, a cumulative trading volume exceeding $440 billion, and an open interest of $3.5 billion; since July 17, TradeXYZ's seven-day trading volume has surpassed that of Hyperliquid's native crypto perpetual contracts.
The Q2 report shows that trade.xyz's share of HIP-3 trading volume rose from 85% in March to 97% in June, and approached 100% in July. By historical cumulative standards, trade.xyz has captured approximately 93% of HIP-3 trading volume, with second-place dreamcash accounting for only 4.2%, and all other deployers—including Kinetiq, Felix, and Paragon—together accounting for less than 3%.
Notably, according to a recent study by Arrakis in the first quarter of this year, approximately 63% of trade.xyz’s trading volume comes from around 360 market-making wallets, including professional market makers such as Jump Crypto, Selini Capital, and Wintermute. In terms of wallet count, about 43% of addresses were created by a single Polymarket operator operating a sybil farm, yet these addresses contributed less than 1% of actual trading volume.
This structure emerged against the backdrop of others stepping away and new entrants being unable to break in.
In June this year, early adopter Felix officially shut down its HIP-3 perpetual market. Co-founder Charlie admitted in a post-mortem that despite having generated approximately $3 billion in trading volume with pioneering assets like crude oil, gold, and silver, they were ultimately overtaken when the same markets were launched on trade.xyz priced in USDC, leaving them no choice but to exit.
Reportshows,that among the same group of deployers, Ventuals and Felix exited together on the USDH settlement date in mid-June, Dreamcash ceased operations in early July, and Kinetiq chose to migrate, launching its first USDC trading pairs on July 1.
Recently, new entrants have been attempting to capture market share.According to reports,Paragon has consistently acquired multiple tickers since mid-July, spending approximately 6,328 HYPE tokens, with a strategic focus on high-narrative sectors such as the AI industry, humanoid robotics, and Reddit, deliberately avoiding the mainstream large-cap stocks favored by trade.xyz. Its weekly trading volume has surged more than tenfold in the short term, but its cumulative market share remains negligible.
3. The default outcome of the mechanism, not excepting HIP-4
HIP-3 was originally a permissionless open mechanism where anyone could deploy their own perpetual market by staking sufficient HYPE. However, in practice, it has become a de facto winner-takes-all system.
The root of all this lies in the mechanism itself.
First, there's the barrier to entry: deploying a HIP-3 market requires staking 500,000 HYPE tokens, which at recent prices amounts to roughly $20–30 million. This immediately excludes the vast majority of teams, leaving only a select few well-capitalized players able to participate.
Second, there is the combined effect of auctions and first-mover advantage. Each deployer gets the first three markets for free; any additional ones require bidding in a global Dutch auction, starting at 500 HYPE tokens, which are immediately burned. Latecomers not only face higher listing costs but also contend with existing liquidity suction. Once early entrants establish depth and user mindshare, latecomers have almost no room for cold starts.
Finally, there’s the economics of breakeven. According to analyst Shaunda Devens from Blockworks Research, most HIP-3 deployers, excluding trade.xyz, are seeing annualized returns on their HYPE staking that are close to or even below 1%. Of the 136 paid listing markets analyzed, only 44 have recouped their auction costs, with the median breakeven period for non-trade.xyz markets stretching to four years.
The same logic is being carried forward on HIP-4.
On July 20, Hyperliquid announcedthat HIP-4 will enable permissionless deployment. HIP-4 is its attempt in the direction of prediction markets (binary outcome markets), with a much more restrained approach than HIP-3: it will follow a template requiring validator voting approval and limit the number of markets directly deployed by validators to fewer than 10 per year. However, the high staking threshold remains unchanged at 500,000 HYPE.
According to Arrakis, over its first two weeks of launch, a frontend on Outcome.xyz processed more than 10 times the volume of the second-place platform..
Algorithmic wallets account for only 6% of total wallets but contribute nearly half of the trading volume on HIP-4; retail wallets, although making up the majority of total wallets and reaching the highest open interest, account for less than one-third of the trading volume on HIP-4.
During the same period,HIP-4 has matched Polymarket in BTC binary options trading volume, but its pricing deviates 4 to 5 times more from Deribit’s implied probabilities than Polymarket or Kalshi.
The thin liquidity is also reflected in execution.Arrakis measured the maximum trade size the market could absorb within a ±2% slippage threshold and found that, despite a surge of liquidity on the first day due to market enthusiasm, execution quality deteriorated over time due to insufficient order depth during most periods. In the worst case, a $1,000 trade would result in a 2% slippage for the trader.
Arrakis said this is both a bottleneck for users and an opportunity for market makers. In markets with such low trading volume, the first market maker willing to commit significant capital will face almost no competition and can profit from market gaps created by the current order book inefficiency.
From this perspective, HIP-4 also showed signs of low liquidity and high concentration in its early stages—a natural outcome of the mechanism, inherently favoring a few players with capital, resources, and first-mover advantages.
4. HYPE Where is it headed?
The mechanism issue is already a settled fact; under this framework, how long can HYPE’s value support be maintained?
In the short term, HYPE’s price floor is primarily supported by trade.xyz. HIP-3 contributes a significant portion of the platform’s trading activity, and the protocol’s share of fee revenue is directed into the rescue fund for buybacks.
According toon-chain analyst MLM, since the team tokens began unlocking in December 2025, approximately 4.93 million HYPE have entered the team wallet, with around 4.33 million sold or transferred OTC, resulting in approximately $165 million in cashouts. During the same period, the rescue fund repurchased about 9.8 million HYPE, investing approximately $364 million—more than twice the rate of the team’s sales.
Therefore, the unlocking itself has not yet created significant selling pressure; the main factor suppressing the price is currently changes in demand.Latestdatashows,Hyperliquid has cumulatively burned 47.53 million HYPE tokens, valued at approximately $2.68 billion, representing 4.75% of the maximum supply of 1 billion HYPE.
In the medium term, the variables are becoming more complex.
Recent market rumors suggest that trade.xyz is seeking funding at a valuation of approximately $1.5 billion. Although this has not been officially confirmed, the signal itself warrants caution: the alignment of interests between the protocol and its deployer may no longer be as strong. Once an independent valuation is solidified, its bargaining power over the protocol will only increase, potentially reopening negotiations on revenue splits, terms, and its continued involvement.
However, this doesn’t necessarily have to lead to a split. According to Blockworks analysts, trade.xyz’s departure due to high fee splits is the weakest of several concerns; both parties are deeply intertwined in terms of reputation, economics, and architecture, leaving neither with a reason to leave the other.
Iftrade.xyz were to leave, it would have to rebuild the entire exchange layer—the most difficult part of the tech stack—and abandon nearly its entire trader base; whereas if Hyperliquid brings RWA in-house, it sends a signal to all future deployers—that if you grow large enough, you’ll be replaced—equally a reputational suicide.
Analysts also noted that a 50% revenue share is far from Hyperliquid’s only monetization pathway. It also earns from write priority fees and read fees paid by market makers; a larger portion comes from secondary effects—traders bringing in USDC to go long on RWA, driving growth in on-chain balances, of which Hyperliquid retains 90%, estimated at around $30 million per month, surpassing the entire HIP-3 perpetual fee pool shared equally with trade.xyz.
Another variable is HIP-4, and the market has continued to uphold the high staking threshold, likely leading once again to dominance by a small group of participants. The narrative of openness will be further diluted, and HYPE’s long-term premium as a platform token will also be discounted.
Overall, the growth brought by trade.xyz is real. For Hyperliquid, the real test is whether it can continue to accumulate value at the protocol level. As long as trade.xyz’s growth continues to translate into HYPE value capture, centralization may not necessarily be a bad thing.
In terms of valuation,Grayscale recently reported that currently, HYPE is cheaper than traditional fintech companies based on cash flow valuation. The report assumes protocol revenue of approximately $1 billion in 2027 (about 20% higher than in 2025), estimating earnings per share of approximately $3.25 to $3.75, resulting in a forward P/E ratio of only 15 to 18 times at the current price.