ICE Investment, L2 Launch, 1000x Leverage Mechanism: Hyperliquid’s On-Chain Financial Evolution

Introduction: An Exchange Chain Begins to Embrace L2s

When people mention Hyperliquid, most think of it as the largest decentralized perpetual futures exchange. In 2025, its annual trading volume reached approximately $2.9 trillion, accounting for roughly 80% of on-chain perpetual trading volume and surpassing Coinbase in total trades.

But Hyperliquid is also a public chain. Its order book runs directly on its own L1, while the HyperEVM hosts a suite of applications including lending, DEXs, and staking protocols.

Now, this public chain has its first L2: On November 9, Kinetiq, the largest staking protocol on Hyperliquid, will launch Elysium. With a processing target roughly 100 times that of HyperEVM, it can also read Hyperliquid’s entire order book.

Elysium is not an isolated event. Over the past month, Hyperliquid’s role has been evolving. It is no longer just an exchange; an increasing number of teams are starting to treat it as infrastructure and build their products on top of it:

• Papertrade only borrows prices from Hyperliquid. Launched on October 10 with a “1000x leverage, lose-to-mine” product, its notional trading volume broke $1 trillion within the first week;
• Wall Street has taken a liking to its matching engine. On October 29, ICE (parent company of the New York Stock Exchange) announced an investment in Trade[XYZ], planning to leverage Hyperliquid’s technology to launch a regulated perpetual futures market for U.S. users.

A crypto casino, a Wall Street securities exchange, and a new chain may seem unrelated at first glance, but they all interact with Hyperliquid across different layers. This article follows this thread to clarify the transformations happening on this exchange chain and where they will steer Hyperliquid.

The Architecture of Hyperliquid: Exchange First, Chain Second

Hyperliquid’s origin is the reverse of most public chains: the team initially wanted to build an exchange, found existing chains couldn’t handle the load, and so they built their own chain, embedding the order book, matching engine, and clearing directly into the chain code.

Many companies are now walking this path. Robinhood launched its own chain to issue stock tokens, Circle is building the stablecoin payment chain Arc, and Ondo is constructing its own asset chain. However, most of them only put assets on-chain, while trading still occurs within their own closed systems.

Hyperliquid’s trading engine runs natively on-chain, allowing the order book to be directly accessed by other on-chain programs. The subsequent developments all stem from this capability.

Hyperliquid consists of two components: HyperCore and HyperEVM. HyperCore is Hyperliquid’s proprietary trading system, which can only invoke predefined functions; HyperEVM is an Ethereum-compatible environment specifically designed for external protocols to deploy smart contracts. (Architecture shown below)

Figure: Comparison of architectural integration levels for Papertrade, Trade[XYZ], and Elysium into Hyperliquid

Several key points can be observed from the diagram:

First, HyperCore hosts three types of markets: official native markets, third-party deployed perpetual markets under HIP-3, and third-party deployed prediction markets under HIP-4. They share the same matching engine and margin accounts. Third-party U.S. stock and crude oil contracts run in the exact same trading system as official BTC and ETH contracts, allowing users to trade everything with a single account.

Second, smart contracts on HyperEVM can real-time read HyperCore’s order book prices, positions, and balances, and can also send order execution commands to HyperCore. On other chains, contracts fetching exchange prices rely entirely on external oracles for forwarding; on Hyperliquid, contracts and the exchange reside on the same chain, enabling direct invocation.

Third, these features have been progressively opening up since 2025, steadily maturing the ecosystem. (Timeline shown below)

Figure: Evolution timeline of Hyperliquid core features and key ecosystem events

Fourth, the three recent cases are highly representative, signaling that Hyperliquid’s infrastructure is largely complete and the ecosystem is entering an application expansion phase:

• Papertrade is deployed on HyperEVM, only reading HyperCore’s mid-price, while transactions are settled through its own liquidity pool;
• Trade[XYZ] opens markets directly on HyperCore via HIP-3. The planned U.S. market by ICE also relies on HIP-3, utilizing Hyperliquid’s matching engine;
• Elysium is an L2 settling to HyperEVM, reading HyperCore’s full order book through its own nodes, and will later support direct order placement.

These three cases correspond to three depths of external integration into Hyperliquid: borrowing prices, borrowing matching engines, and building separate chains for the order book. The following three chapters expand on this sequence.

Price Layer Integration: Papertrade

Launched on October 10 and deployed on HyperEVM, Papertrade only offers two markets: BTC and ETH. It does not place orders on Hyperliquid, instead reading Hyperliquid’s mid-price once upon opening and once upon closing a position. All profits and losses are settled against a single USDC liquidity pool—essentially, users bet directly against the pool.

Figure: Illustration of the Papertrade platform and trading interface with up to 1000x leverage

Its selling points are twofold: first, up to 1000x leverage; second, loss-to-mine mechanics. The PAPER token has no pre-mine and is not allocated to the team or investors. It is only minted when users close positions at a loss or get liquidated. Staking PAPER allows holders to earn a share of the pool’s revenue. By design, losing traders gradually become shareholders of the house.

Rules and Chip Allocation Under Fair Launch

Papertrade claims a fair launch, but a closer look at its rules and data reveals that retail users rarely stand to gain an advantage.

First, the rules favor whales over retail. The minimum position size is $10,000. Users cannot add margin after opening a position, and order execution requires queueing with large orders taking priority. Profitable earnings are also subject to a discount factor. Researcher @xizhe_chan analyzed 134,000 profitable orders, finding that smaller price movements result in higher deduction rates:

Figure: Comparison between price volatility and actual net profit on Papertrade

Second, early-entry whales cornered the supply. The earlier the loss, the more PAPER mined: losing $1 at launch yields 100 tokens, dropping to 40 ten hours later, and down to ~12 by October 17. Whales typically use two accounts to open simultaneous long and short positions, mining tokens through controlled losses while recovering their principal. Their effective cost is only about 30% of a full liquidation, allowing them to break even quickly through dividends:

Figure: Statistics on returns and capital recovery ratios for top-tier holding addresses on Papertrade

By October 20, the top 1,000 wallets held 88% of PAPER, capturing 91% of all dividends distributed.

Third, rules were altered just ten days after launch. Following the listing of PAPER pre-market contracts on Paragon and Aster, Papertrade announced that PAPER tokens would only be eligible for staking dividends and could no longer be transferred or sold. The team justified this by stating that if external actors could short PAPER, attackers could simultaneously manipulate the price to drain the liquidity pool while profiting from shorting PAPER.

However, many participants intentionally incurred losses to mine PAPER specifically betting on its future tradability. Once the rule changed, those expectations completely evaporated.

The market reacted swiftly. Papertrade’s daily revenue plummeted from a peak of ~$25 million in its first week to $178,000 on October 22, while TVL dropped by over 70%:

Figure: Trend of locked value (TVL) changes on Papertrade

Key Takeaways: The First Native Application on HyperEVM

Although Papertrade’s hype cycle was brief, it offers three critical insights for the Hyperliquid ecosystem.

First, HyperEVM now has a truly native application. Previously, lending and DEX protocols on HyperEVM were mostly forks from other chains. Papertrade, however, is built entirely on top of HyperCore’s pricing; it cannot function independently of Hyperliquid.

Second, the barrier to launching trading products on Hyperliquid has significantly lowered. Without internal market makers or an order book, Papertrade simply reads Hyperliquid’s prices. Within a week of launch, its notional volume exceeded $1 trillion. External teams can now introduce new trading categories without needing to bootstrap their own liquidity.

Third, Hyperliquid’s price feed itself has become a core resource. Historically, a blockchain’s primary asset was considered to be block space. Papertrade demonstrates that smart contracts on HyperEVM can directly access real-time prices from Hyperliquid’s order book without relying on external oracle forwards, representing a more native on-chain price source:

Figure: Comparison between standard public chain oracle feeds and Hyperliquid's native on-chain price reading

Of course, the more a price feed is relied upon, the greater the pressure to defend it. On the very night Papertrade launched, users already pushed ETH prices with large orders on Hyperliquid to simultaneously profit from massive positions on Papertrade. Such price manipulation risks will be a major concern for future HyperEVM applications.

Matching Layer Integration: Trade[XYZ] and Wall Street

Papertrade borrowed prices, while Wall Street (ICE) aims to borrow an entire trading system.

Trade[XYZ] is the largest HIP-3 deployment, directly launching perpetual markets for U.S. equities, indices, crude oil, and forex on HyperCore. It utilizes Hyperliquid’s matching engine and margin system, importing prices from external sources. Notably, its S&P 500 contract holds formal authorization from S&P Dow Jones Indices.

One Year Since HIP-3 Launch: Scale Expansion and Market Concentration

Launched in October 2025, HIP-3 is an open mechanism where any team staking 500,000 HYPE can launch their own perpetual futures market on HyperCore.

In its first year, HIP-3 accumulated approximately $665 billion in trading volume, growing from 0.2% to 51.3% of Hyperliquid’s total perpetual volume by July. This growth was fueled by several market waves: precious metals at the start of the year, crude oil trades during weekends due to the March Iran conflict, and June/July rallies surrounding the SpaceX IPO and memory chip stocks.

Figure: Trend of HIP-3’s proportion of Hyperliquid’s perpetual trading volume

Trading composition continues to rotate: In March, commodities accounted for 64% of HIP-3 volume; by July, individual stocks and Pre-IPO contracts made up 62%. On the day SPCX launched, contracts hit $1.4 billion in volume, equivalent to 30% of that day’s HIP-3 total.

After July, HIP-3’s share dropped back to around 30%, with over 70% of trading still driven by official native markets.

Concentration remained virtually unchanged. As the inaugural third-party market on HIP-3, Trade[XYZ]’s share has consistently hovered around 90%, rising to ~97% in October. Its advantages primarily lie in speed-to-market and liquidity:

• Fast listings, capturing hot topics. New market slots on HIP-3 are shared among all deployers, auctioned off every 31 hours. Winners decide which assets to list themselves. Well-capitalized, Trade[XYZ] secured 8 out of 23 slots in August alone and deployed them rapidly: the median time from on-chain registration to first trade was just 3.3 days. 65% of markets went live within a week, and 47% within three days.
• Strong liquidity, immediately tradable upon launch. Liquidity is not shared between HIP-3 markets and Hyperliquid’s official markets. Each maintains an independent order book, and depth must be bootstrapped by deployers attracting market makers. Trade[XYZ] successfully recruits market makers and injects capital, ensuring new markets launch with tight spreads and deep books. Good liquidity attracts traders; more traders attract market makers. Once this flywheel spins, latecomers struggle to break in.

Beyond these factors, Trade[XYZ] boasts strong brand recognition and product credibility. Built by the Hyperunit team, which originally constructed Hyperliquid’s spot asset infrastructure, it secured formal authorization from S&P Dow Jones Indices to launch the first licensed S&P 500 perpetual contract.

Consequently, despite being a third-party deployer, Trade[XYZ] is widely perceived as having the closest ties to Hyperliquid, effectively becoming synonymous with the HIP-3 ecosystem in many ways.

From Regulation to Integration: Three Paths for Wall Street

Trade[XYZ]’s biggest selling point is 7x24 hour trading, something traditional exchanges cannot match. While U.S. equities and CME crude oil futures close on weekends, Hyperliquid remains one of the few venues where these assets can still be traded. During the March Iran conflict, JPMorgan analysts noted traditional traders migrating to Hyperliquid to trade crude.

Wall Street’s response is evolving. From March to November, three distinct approaches toward Hyperliquid have emerged, each drawing progressively closer:

Figure: Illustration of three pathways for Wall Street to integrate with on-chain perpetual contracts

Path 1: Leveraging a centralized exchange to bypass Hyperliquid and offer 7x24 trading independently. In March 2026, ICE took a stake in OKX, first launching crude oil perpetual contracts on the platform. ICE then formed a joint venture with OKX, preparing to bring NYSE tokenized stocks and ICE futures to OKX users.

Simultaneously, ICE and CME expressed concerns to Congress regarding potential price manipulation of oil by Hyperliquid, pushing for CFTC oversight. At this stage, Hyperliquid was still viewed as a competitor requiring strict caution.

Path 2: Direct integration with Hyperliquid. Toward the end of the month, the CFTC allowed perpetual contracts to be listed as futures in the U.S., clearing the regulatory path and shifting ICE’s stance. The ICE CEO publicly stated this 11-person exchange is “bigger than Nasdaq” and noted multiple discussions had already taken place.

On October 29, ICE invested in Trade[XYZ], planning to launch the U.S. market ICE[XYZ]: Hyperliquid provides matching technology, Trade[XYZ] designs the market, and ICE operates the exchange while handling clearing. The proposal awaits CFTC approval.

Through this, Hyperliquid transitioned from a rival into ICE’s trading service provider.

Path 3: Token holdings coupled with broker-dealer channels. Beyond exchanges entering the fray, another approach involves token holders taking proactive steps.

Hyperliquid Strategies (NASDAQ: PURR), a publicly traded company holding ~38.9 million HYPE, initially operated solely as an $HYPE corporate treasury, using stock market fundraising to buy and stake tokens. On November 5, it applied to become a futures commission merchant (FCM), aiming to funnel U.S. users into HIP-3 markets.

This setup allows PURR to both hold HYPE and drive transaction volume to Hyperliquid: the more users trade, the more fee-driven buybacks occur, directly benefiting PURR’s $HYPE holdings.

Figure: ICE’s collaboration landscape across centralized and on-chain perpetual trading ecosystems

As illustrated, ICE remains at the center, firmly controlling benchmark pricing, clearing, and compliance, while delegating other functions to partners: OKX handles centralized matching, Trade[XYZ] designs and operates HIP-3 markets, Hyperliquid supplies the on-chain matching engine, and Hyperliquid Strategies fills the entry gateway for U.S. users.

Within this framework, Hyperliquid and OKX occupy parallel roles as ICE-accessible trading venues—one off-chain, the other on-chain. Thus, Hyperliquid transitions from a monitored adversary to a voluntarily integrated trading infrastructure by Wall Street.

Division of Labor: Licensed Institutions Handle Clearing, Chains Handle Matching

Before ICE, other licensed institutions had already approached Hyperliquid.

On September 16, Kraken’s parent company Payward announced it would deploy HIP-3 markets through Bitnomial (a CFTC-licensed exchange and clearinghouse), later securing a spot on Hyperliquid’s HIP-3 approved whitelist, becoming the first CFTC-regulated deployer.

However, compared to Payward’s crypto-native origins, ICE is the parent company of the NYSE. Its investment in Trade[XYZ], combined with prior moves into OKX, truly marks the formal entry of mainstream Wall Street exchanges into the space.

Placing these collaborations side-by-side clarifies the division of labor logic:

Figure: Comparative division of labor in ICE vs. Payward’s integration into centralized and on-chain trading architectures

It is evident that licensed institutions retain control over their strongest domains. Partnering with OKX, ICE controlled the crude benchmark price. For the U.S. market, both ICE and Payward keep clearing and compliance internally.

Clearing represents the most heavily regulated and highest-barrier component in traditional exchanges. Clearinghouses manage client margins, absorb counterparty risk, and require substantial capital, mature risk management frameworks, and regulatory licenses—daunting for newcomers. ICE inherently operates multiple clearinghouses, and Bitnomial holds dual exchange and clearing licenses.

Matching, conversely, is increasingly resembling a standardized service: whoever has the fastest engine and deepest liquidity gets used. During an earnings call, the ICE CEO explicitly positioned these perpetual markets as supplements to traditional futures business.

For Hyperliquid, this signals that on-chain matching is gaining traction as institutional infrastructure, likely paving the way for more entities to follow suit.

Challenges arise here as well. Regulated U.S. markets mandate KYC and entry thresholds, which the HIP-3 whitelist is designed to enforce. Even if such markets run on Hyperliquid’s matching engine, only pre-approved U.S. clients and market makers can participate. The vast majority of Hyperliquid’s existing offshore traders are excluded, meaning market depth must be rebuilt from scratch.

In other words, Wall Street extracts Hyperliquid’s matching technology, but its most valuable liquidity network may not seamlessly migrate alongside it.

Order Book Layer Integration: Elysium

Papertrade borrowed prices, Wall Street borrowed matching engines, but Kinetiq goes a step further: building a separate chain, Elysium, specifically to interface directly with Hyperliquid’s order book.

Elysium Project Overview and Market Expectations

Developed by Kinetiq, the largest staking protocol on Hyperliquid, Elysium was first announced on X on August 24, opened its testnet on September 22, and is scheduled to launch on mainnet on November 9.

Built on the Arbitrum tech stack and settling to HyperEVM, it uses $HYPE for fees, targeting a block time of approximately 100 milliseconds.

Discussions around it broadly fall into three camps:

• Bulls are betting on $KNTQ. Half of Elysium’s fee revenue will be used to repurchase and burn Kinetiq’s token, $KNTQ. Upon announcement, $KNTQ surged ~30%, and by October 28, hit a historical high of $0.4547 after gaining nearly 48% over two weeks.

Note: Elysium currently has no native token; related trading revolves primarily around the developer Kinetiq’s token, $KNTQ.

Primarily traded on Hyperliquid spot pairs (not yet listed on major centralized exchanges aside from Kraken and MEXC). A version bridged to Base via Chainlink is also available for EVM chains.

Figure: Daily chart of KNTQ/USDC spot market on Hyperliquid

• Ecosystem observers emphasize its experimental significance. Some community members note that HyperEVM has lacked strong official backing from Hyperliquid, leaving the ecosystem relatively quiet. Elysium represents a self-driven initiative by an internal team. With ample funding and expansion capabilities, Kinetiq attracted a wave of top-tier applications to integrate on day one, potentially injecting fresh attention into HyperEVM.
• Skeptics focus on hard data. Community users calculated that over roughly three weeks on the testnet, accumulated volume reached 30 million transactions, yet 30-day total fees amounted to only ~269 HYPE. Projecting similar activity to mainnet, monthly funds available for $KNTQ buybacks would hover around $11,000—far short of KNTQ’s ~$350 million FDV. This raises doubts about Kinetiq’s claim that “Elysium will generate over $100 million in annual revenue for Hyperliquid.” More intriguingly, the vesting cliff for KNTQ team and investor tokens expires on November 27, shortly after mainnet launch, likely triggering a fresh wave of sell pressure.

All three perspectives point to a singular reality: the market is currently pricing expectations rather than realized revenue. These assumptions will only be validated by actual trading activity post-mainnet launch.

Hyperliquid’s Spot Trading Weaknesses: New Tokens Can’t Reach HyperCore, HyperEVM Runs Too Slowly

Elysium aims to patch Hyperliquid’s chronic spot trading deficiency. While Hyperliquid’s perpetual futures rank globally leading, spot volumes have lagged behind due to two structural issues:

• New tokens can only originate on HyperEVM. HyperCore’s spot order book suits mature assets. For new tokens to list, projects must auction slot allocations and secure professional market makers for continuous quoting. Newly issued tokens cannot meet these requirements and are forced to trade initially on issuance platforms and AMM pools, which can only be deployed on HyperEVM.
• HyperEVM is deliberately rate-limited. Both HyperEVM and HyperCore run on the same chain, processed by the same validator set. To prevent app computations from starving trading resources, Hyperliquid caps HyperEVM throughput: blocks produce roughly every 1 second, and apps can only fetch the best bid/ask level. This suffices for lending and staking but falls short for professional market-making pools requiring multiple price refreshes per second.

Consequently, new assets struggle to grow within the Hyperliquid ecosystem. Kinetiq notably points out that spot volumes absorbed by professional market-making pools on Solana far exceed those on Hyperliquid.

Elysium’s Solution: Accelerating Apps and Paving the Way for New Assets

Step one: fixing speed. Elysium emphasizes high velocity, targeting processing capabilities ~100x that of HyperEVM. However, clarity is needed on what it’s actually faster than: it outpaces HyperEVM, not HyperCore.

Elysium targets a 0.1-second block time, whereas HyperCore’s median latency from order submission to confirmation is already ~0.2 seconds. The trading engine was never slow.

Figure: Comparison of transaction confirmation latencies across Ethereum Mainnet, HyperEVM, HyperCore, and Elysium

Speed comes with trade-offs. Compared to HyperEVM, Elysium can access a more complete order book, but data verifiability takes a hit.

Figure: Differences in block production, order book reading, and security models between HyperEVM and Elysium

In essence, Elysium trades trust for speed and data depth: prices fetched by HyperEVM are guaranteed by Hyperliquid consensus, while Elysium’s full order book comes from its own running nodes, lacking on-chain cryptographic verification.

Hyperliquid’s official roadmap also prioritizes boosting HyperEVM throughput. Elysium essentially bets that official upgrades will arrive too slowly to matter.

Step two: Establishing a feedback loop for new assets. With faster infrastructure, Elysium architects a lifecycle path for new assets from inception to returning to Hyperliquid:

Figure: Illustration of the lifecycle pathway where new assets incubate on Elysium before flowing back to Hyperliquid

Specifically:

• New tokens initially launch on Elysium’s issuance platforms and standard AMM pools, capturing earliest-stage trading;
• Once trading becomes active and reaches scale, they graduate to Elysium’s professional market-making pools, where market makers provide deeper quotes;
• Subsequently, qualifying assets upgrade to HyperCore’s spot order books, eventually culminating in HIP-3 perpetual contracts.

Under this pipeline, Elysium handles incubation while Hyperliquid absorbs mature assets, ultimately routing volumes back to HyperCore. If successful, this establishes a highly stable new asset acquisition channel for Hyperliquid.

This also serves Kinetiq’s strategic pivot. Its staking business has plateaued, with TVL down over 60% from its October 2025 peak. Building Elysium transforms Kinetiq from a staking protocol into a chain operator while unlocking fresh revenue streams for $KNTQ.

Overall, Elysium plugs Hyperliquid’s spot and new-asset gaps, while simultaneously carving a secondary growth trajectory for Kinetiq beyond staking. At this juncture, their interests temporarily align.

The Nature of Elysium: Bundling Order Book Access into a Chain

Though branded as a new chain, Elysium doesn’t truly sell block space—it sells direct integration access to Hyperliquid’s order book. Viewing it alongside Papertrade makes this crystal clear:

Figure: Comparative integration hierarchy into Hyperliquid’s order book for Papertrade vs. Elysium

Moving from borrowing single-level quotes to reading entire order books and executing direct trades, external reliance on Hyperliquid’s order book is intensifying.

Nevertheless, these remain promises: performance lacks mainnet validation, liquidity aggregation hinges on official Hyperliquid adoption, and the bulk of on-chain revenues flow to $KNTQ rather than $HYPE. Elysium’s practical rollout warrants continued monitoring.

Hyperliquid’s Role Transformation: From Exchange to Trading Infrastructure

Synthesizing the previous steps, external teams integrate with Hyperliquid through varying methods, yet share a common realization: they no longer view it merely as a trading venue. Hyperliquid’s identity is shifting, gradually assuming three distinct roles within trading infrastructure:

Figure: Triple roles assumed by Hyperliquid as an open trading infrastructure

As a price source, it quotes markets during traditional closures. Papertrade’s confidence in building a standalone trading platform solely on Hyperliquid’s pricing rests on the feed’s sufficient liquidity and trustworthiness.

This credibility extends beyond crypto: During weekend closures of U.S. equities and crude, Hyperliquid remains one of the few active quote sources. Ahead of IPOs for companies like SpaceX, Pre-IPO contracts began trading well in advance, historically tracking closely to opening prints—a precedent Trade[XYZ] cited in regulatory submissions to the U.S. SEC.

As a matching service provider, it defers compliance to licensed entities. Under ICE’s model, matching remains anchored on Hyperliquid, while clearing and client onboarding are delegated to ICE and futures brokers.

Hyperliquid Strategies’ FCM application precisely aims to legally onboard U.S. clients. Meanwhile, Hyperliquid prepares whitelisted HIP-3 markets managed by independent operators handling compliance. By keeping the base chain non-compliant and placing regulatory gateways on the layer above, an offshore on-chain exchange can effectively tap into the U.S. market without altering its foundational architecture.

As a listing destination, it absorbs newly maturing assets. Elysium’s architected asset lifecycle culminates in HyperCore spot markets and HIP-3 perpetuals. HIP-3 deployers battle every 31 hours to auction listing slots, fundamentally competing for access to Hyperliquid’s order book.

Peripheral teams handle gateway creation and asset incubation, migrating only mature assets to execute final trades on Hyperliquid.

All three functions rest on a single prerequisite: the depth and activity of Hyperliquid’s order book. External teams willingly build businesses around it precisely because of this strength; should the order book lose its competitive edge, these functional pillars would inevitably collapse.

This marks Hyperliquid’s fundamental divergence from exchange-backed chains. Blockchains by firms like Robinhood and Circle primarily host on-chain assets while keeping matching confined to internal systems, rendering them unusable by external developers; Hyperliquid places the order book directly on-chain, exposing its pricing, matching, and liquidity for external consumption.

This aligns perfectly with Jeff Yan’s vision: presented at TOKEN2049 in October, he articulated that Hyperliquid aims to become an open infrastructure for various financial products, avoiding frontend competition. Developers can directly consume its markets and liquidity without rebuilding matching or clearing systems.

The Value of $HYPE: Ecosystem Expansion and Beneficiary Allocation

As more teams integrate with Hyperliquid, the ecosystem expands rapidly, but expansion gains do not automatically flow to HYPE. Understanding this requires tracing $HYPE’s value drivers first, then dissecting how new business lines and intermediate layers capture value.

$HYPE Price Support Mechanisms: Fees, Buybacks, and Corporate Treasury

$HYPE carries no equity claim on any company, nor does protocol revenue distribute directly to holders. Its price valuation is entirely backed by Hyperliquid’s operational cash flows: how much the platform earns, and how those revenues convert into demand for $HYPE. Currently, this support stems from three primary pillars:

• Fee revenue forms the foundation. Trading fees generated on Hyperliquid represent its core income. With ~$2.9 trillion in perpetual volume for 2025, HYPE holder proceeds totaled ~$63.94 million over the 30 days ending Oct 28, ranking #1 across all protocols. Starting in October, interest generated on deposited USDC introduced a new, volume-independent revenue stream.
• Buybacks transform revenue into demand. Approximately 97–99% of Hyperliquid’s net fees flow into the bounty/reward fund, continuously buying back HYPE on open markets; additionally, 90% of on-chain USDC interest is earmarked for buybacks. In this model, higher revenue directly scales buyback volume, converting trading activity immediately into upward price pressure on $HYPE.

Notably, the scale of $HYPE buybacks is substantial. Since June, monthly hyperliquid allocation to buybacks ranges between $38M and $74M. The incentive fund has cumulatively purchased >48M HYPE costing ~$1.365B as of Oct 13.

Figure: Monthly capital allocation size by Hyperliquid for HYPE buybacks

• Crypto treasuries act as outsized buyers outside protocol mechanics. NASDAQ-listed Hyperliquid Strategies (PURR) operates exclusively as a digital asset treasury holding $HYPE. Funded via public markets, its position grew from 12.5M tokens at Dec 2025 IPO to ~38.9M by Oct 28, averaging ~$56 cost basis, fully staked. This buyback bucket operates independently of protocol revenue, strictly contingent on capital raising capacity in equity markets.

Figure: Growth curve of HYPE holdings by Hyperliquid Strategies

Value Distribution of New Business Lines: Intermediate Layer Diversion vs. HyperCore Return

$HYPE buyback capital originates strictly from HyperCore fees; only trades executed natively on HyperCore convert into direct $HYPE demand. Therefore, the value captured by new ventures for $HYPE hinges on two variables: execution location and revenue allocation structures.

Measured against this standard, value generated by new initiatives splits into two channels: some volume/value reverts to HyperCore, while portions remain trapped within intermediate development layers. Currently, the latter captures a significant share:

Figure: Execution locations and value distribution comparisons across HIP-3, Papertrade, Elysium, and ICE[XYZ]

HIP-3 is the only module successfully routing substantial volume back to HyperCore, yet corresponding fees haven't followed. To incentivize deployers and users, most markets operate in aggressive growth phases featuring slashed rates. Remaining fees are split 50/50 with deployers, resulting in volume shares vastly outpacing fee contributions:

Figure: Comparative ratio of HIP-3 volume share versus fee revenue share on Hyperliquid

Furthermore, new business volumes concentrate heavily among a handful of teams, mirroring revenue concentration. Trade[XYZ] alone commands >90% of HIP-3 volume and captures half of associated fees. This reflects transitional hyper-growth dynamics engineered by official incentives: slashed fees and lucrative revenue splits actively court third parties, prioritizing market cap expansion over immediate yield retention.

Ultimately, Hyperliquid strategically sacrifices margin for ecosystem scale expansion. Short-term $HYPE accretion from new verticals remains minimal; final impact depends entirely on how effectively intermediate layers route volume back to native HyperCore execution.

Conclusion: The Order Book Remains Hyperliquid’s Core Asset

Papertrade, ICE, and Elysium integrate with Hyperliquid through divergent architectures, all converging on a single objective: exploiting the order book. Papertrade arbitrages price feeds, ICE leverages the underlying matching engine, while Elysium seeks comprehensive book visibility with direct execution capabilities.

Even conceptualized as an L2, Elysium serves a fundamentally different purpose than Ethereum scaling solutions. While ETH L2s disperse mainnet transactional load, Elysium optimizes for rapid, granular order book ingestion. Where most public chains monetize raw block space, Hyperliquid’s competitively demanded commodity is undeniably the order book itself.

Enabling this specific utilization paradigm requires satisfying two baseline conditions:

• First, native on-chain placement allows direct programmatic access. Competitor chains by Robinhood and Circle merely tokenize assets while isolating matching internally, blocking external integration.
• Second, exceptional depth paired with 24/7 accessibility invites universal participation. Hence, weekend crude dynamics and pre-IPO SpaceX pricing naturally form here first. Wall Street noticed Hyperliquid specifically because of this liquidity availability. Post-CFTC deregulation in May, ICE pivoted aggressively from demanding regulatory oversight to investing directly in Trade[XYZ], which operates markets natively atop it.

External dependency on the order book does not guarantee automatic value accrual to Hyperliquid. At least two unresolved friction points persist.

Firstly, systemic risk-reward asymmetry exists. External protocols access Hyperliquid pricing royalty-free, creating arbitrage opportunities when massive capital settles against those reference prices. Price manipulation proved viable mere hours after Papertrade’s debut. As external referencing scales, manipulation pressure on Hyperliquid’s order book intensifies disproportionately, while captured revenues flow exclusively to peripheral applications.

Secondly, regulatory segmentation fractures unified liquidity. While ICE and Payward utilize Hyperliquid’s matching tech, compliant markets necessitate gated access barriers that exclude offshore traders and market makers. Hyperliquid’s paramount asset lies in consolidated global liquidity—the exact component hardest to transplant into regulated silos. Matching algorithms export readily; embedded liquidity networks prove notoriously difficult to replicate.

These structural challenges ultimately dictate $HYPE valuation. Because $HYPE derives value exclusively from HyperCore-native fees and subsequent buybacks, only execution transacted directly on the base chain mathematically matters.

Currently, Hyperliquid deploys tactical concessions through reduced fees, revenue sharing, and open pricing APIs, exchanging margin for widespread integration. Significant revenue streams consequently stagnate within Trade[XYZ], Kinetiq, and PAPER stakers. Operating on a classic acquire-scale-exit strategy, success hinges entirely on whether these intermediaries ultimately funnel volume back to core HyperCore settlement.

Consequently, Hyperliquid’s next-phase survival metrics hinge on two capabilities: implementing usage-based pricing models for order book consumption, and preserving cross-border unified liquidity despite regulatory fragmentation. Executing both transforms exposed order book data into an insurmountable moat. Failing either reduces Hyperliquid to merely supplying price references and matching substrates for others, where viral ecosystem growth accelerates direct value extraction from the protocol itself.

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