Core Strategy

Adding: HYPE

Crypto Equities Portfolio

Adding: HYPD, SONN

Adding HYPD & SONN to Equities Basket as HYPE Carves a Path to $100

Every cycle, a new player emerges as the next “major.” In 2017, it was ETH. In 2021, it was SOL. In 2025, it is HYPE. Despite being only a few quarters old, HYPE has quickly established itself as a token with the potential to move beyond the crypto bubble and into the broader universe of assets traded by traditional financial market participants.

Hyperliquid Overview

Hyperliquid was founded by Harvard classmates Jeff Yan, a former Hudson River Trading quant and crypto market-maker, and the pseudonymous Iliensinc. After FTX’s collapse, they set out to build a high-performance, transparent Layer-1 exchange that avoids “VC control” and brings centralized-style speed on-chain.

Hyperliquid today is comprised of two main offerings:

• Perpetuals & Spot Exchange (HyperCore): Hyperliquid’s flagship product is its perpetual futures exchange, now one of the largest decentralized derivatives platforms. Alongside perps, it also offers a growing spot exchange that runs on the same on-chain CLOB infrastructure, giving users a consistent trading experience across markets. Together, these venues deliver high leverage, deep liquidity, and fast execution, directly competing with centralized exchanges. Key features include low fees (comparable to Binance at higher volume tiers) and strong capital efficiency.
• HyperEVM: Hyperliquid’s EVM-compatible environment launched in February 2025, marking the first step beyond the enshrined perpetuals and spot DEX. It introduced a general-purpose execution layer, similar to Ethereum, enabling developers to deploy DeFi protocols, NFTs, games, and other applications directly on Hyperliquid’s infrastructure.

Unlike most ecosystems, where an exchange is just another app on top of a blockchain, Hyperliquid’s perpetuals DEX is enshrined directly into the Layer-1 (HyperCore). This design delivers several advantages:

• Native Integration: Matching engine, risk engine, and settlement logic live at the protocol level rather than as smart contracts.
• Performance & Latency: With the DEX embedded in the chain itself, Hyperliquid achieves faster execution and deeper liquidity than contract-based DEXs.
• Security: Consensus and exchange logic are tightly coupled, so the DEX inherits the full security guarantees of the base chain.
• Ecosystem Foundation: Built exchange-first with HyperCore, the network has since expanded through HyperEVM to support EVM-compatible smart contracts and broader applications.

Clear Product-Market Fit

As we have said many times in our research, there are very few products in crypto that have true product-market fit. Bitcoin and stablecoins (and the platforms they run on) are clear examples. The other products with sustained traction include decentralized exchanges and perpetual futures.

Prior to Hyperliquid, decentralized perpetual futures certainly existed, but they lacked the quality and smoothness users were accustomed to on centralized venues. Through its unique architecture, users can now access a permissionless perpetual exchange that is nearly as performant as Binance or Bybit.

The user metrics speak for themselves. Since early 2024, daily active addresses have climbed from below 10k to nearly 60k by August, showing robustness regardless of market conditions. User acquisition has seemingly accelerated as well, though not all new addresses are active.

Looking at the competitive landscape, there is really no meaningful competition to Hyperliquid among other decentralized venues, with HYPE commanding more than 70% market share.

Despite offering low trading fees, Hyperliquid monetizes its users at an estimated ~$20k per active user annually (ARPAU). This figure can be inferred by annualizing fee revenue relative to active user counts. Interestingly, in months when new-user additions have lagged, ARPAU has actually risen on the margin. This dynamic suggests that while user growth matters, simply retaining Hyperliquid’s core cohort of power users is sufficient to sustain revenue growth. This is a feature that may create a defensible moat for the platform.

Cash Cow

As alluded to above, Hyperliquid generates enormous cash flow. This cash generation has accelerated over the past two months, with the protocol generating $87 million in fees in July and $116 million in August. Since inception through August 2025, Hyperliquid has generated more than $570 million in fees. This is quite formidable for any company that launched in 2022 and only began charging for its services in late 2024.

Cash Yield

Further, the company returns the vast majority of that revenue to tokenholders through automated buybacks.

Year-to-date, Hyperliquid has bought back and burned 96% of the fees collected. In August alone, Hyperliquid completed buybacks equivalent to $1.3B on an annualized basis.

The results equate to a 6–12% cash yield based on circulating supply.

This is an important point to hammer home. I talk to many institutional investors who hesitate to get involved in crypto because they cannot determine a clear intrinsic value for a token. That is not an issue for Hyperliquid. As more investors start to dig into crypto as an asset class, they will find HYPE to be something of a palate cleanse, offering graduates of the Benjamin Graham school of value investing something tangible to sink their teeth into.

In terms of its cash-generating capabilities relative to the rest of crypto, HYPE’s $1B in 90-day annualized tokenholder revenue (cash yield) is nearly double the protocol in second place.

One could argue that its ~53x multiple is rich. However, (1) that figure is on a fully diluted basis, which does not contemplate the possibility of some treasury tokens going unissued, and (2) its growth profile makes a higher multiple appropriate.

Spot Market Trading as a Growth Vector

To date, the vast majority of trading activity has taken place on Hyperliquid’s perpetuals exchange. However, the team has taken several steps to boost spot market activity.

The exchange recently introduced multi-quote spot trading, allowing users to trade across multiple quote assets like USDT and USDC. This quickly drove strong volumes, for example, HYPE/USDT surpassed $200M in 24-hour turnover.

In parallel, the platform has been steadily expanding token listings, integrating spot pairs for new assets, and preparing to launch its own stablecoin (USDH) to deepen liquidity and reduce reliance on external stablecoins. The servicing of USDH is currently undergoing something of a bakeoff, with multiple providers competing to be the designated partner for Hyperliquid-native stablecoins.

Combined with ongoing infrastructure improvements to its enshrined orderbook model, these efforts have helped Hyperliquid set new daily spot volume records and strengthen its positioning against both decentralized and centralized competitors.

Integrations as a Growth Vector

Because Hyperliquid is a composable and interoperable DeFi platform rather than a centralized entity, other front-ends can more easily integrate with its services. We have already seen several wallet interfaces integrate Hyperliquid liquidity directly. Below is a table demonstrating this trend. I expect integrations will continue to increase over time, bringing new distribution channels to Hyperliquid.

TradFi Starting to Show Interest

The “problem” for HYPE to date has been twofold:

1. Hyperliquid is currently inaccessible to U.S. investors (one must use a VPN – I am not telling you to do this, but that is how one would theoretically access the platform).
2. Hyperliquid competes directly with centralized exchanges and, therefore, is not listed on major CEXs such as Binance and Coinbase.

This has implicitly capped HYPE’s price potential. But now, two Digital Asset Treasuries (DATs) have launched with the explicit goal of acquiring HYPE:

• Hyperion DeFi (NASDAQ: HYPD): Formerly Eyenovia, Inc., Hyperion pivoted in mid-2025 to become the first U.S.-listed DAT focused on HYPE. Led by CEO/CIO Hyunsu Jung, the firm raised $50 million and acquired 1.5 million HYPE, which it actively stakes through Kinetiq’s iHYPE program and a co-branded validator node.
• Sonnet BioTherapeutics (NASDAQ: SONN): Sonnet is transforming into Hyperliquid Strategies Inc. (HSI) through an $888 million merger with Rorschach I LLC. The new entity will hold 12.6 million HYPE (~$583 million at signing) plus $305 million in cash for further accumulation, making it the largest U.S.-listed HYPE holder. Anchored by former Barclays CEO Bob Diamond’s Atlas Merchant Capital and backed by Paradigm, Galaxy, and Pantera, HSI will spin off legacy biotech assets under CVRs to focus entirely on its HYPE treasury strategy.

There are certainly risks with both companies. HYPD is trading at more than 8x NAV, and the SONN merger has yet to close. However, it is possible that HYPD has made additional purchases not yet reported, and the SONN transaction is expected to close soon, which should serve as a catalyst.

As we move into the latter part of this crypto cycle and traditional financial participants look for some added juice in their portfolios, they may skip BTC, ETH, and SOL and turn to HYPE, the emerging beast of this cycle. With direct acquisition difficult, these DATs will be the logical access point.

Thus, in addition to the usual reasons to be constructive on DATs such as coin-per-share growth and premium expansion, the added reason to be constructive is that HYPE is next in line for mass retail adoption, yet means to achieve spot exposure remain scarce.

Potential Upside

Looking to HyperCore first, we make some basic assumptions about the growth of the decentralized trading landscape and Hyperliquid’s share within it. The end result is an implied FDV of ~$80B.

That FDV would still produce a decent return on invested capital, with HYPE currently trading at ~$56B FDV. But I think there is additional upside once the market begins to appreciate the optionality embedded in HyperEVM and the potential L1 premium it could accrue once early traction is more widely recognized.

Below, we compiled key metrics for several leading Layer-1 protocols (DAU, transactions, and fees) and compared them with HyperEVM’s first six full months (March through August). Some interesting data points:

1. Daily Active Users: HyperEVM already has 28% the DAU of ETH, and 229% the DAU of AVAX. Yes, I understand both ETH and AVAX are designed for users to operate primarily on subnets/L2s, but it is still instructive to make the comparison.
2. Transactions: HyperEVM already has 22% of ETH’s transactions and 55% of AVAX’s. Again, the same caveat applies regarding subnets and layers.
3. Fees: HyperEVM has already reached 37% of the fee profile of SUI and 68% of AVAX’s fees.

In short, investors are ignoring the L1 premium that Hyperliquid should command. Using these ratios and assuming the nascent network doubles its activity over the next twelve months, which I do not believe is a crazy assumption, we arrive at an additional $18B in FDV on top of the $80B in value ascribed to HyperCore.

Then, using the fully diluted share count (which is likely too conservative given the ongoing burn and uncertainty about whether treasury tokens will ultimately be issued), we arrive at a price per token of $98, or roughly 76% upside from yesterday’s price of $55.72.

Risks to the Thesis

Beyond macro factors that could derail the HYPE train, the most near-term risk is the impending token unlocks scheduled to begin in November and continue monthly for the next several years. These unlocks are for core project contributors, with each tranche amounting to ~$560 million at current prices.

This was, admittedly, one of the reasons I was initially hesitant to add HYPE to the Core Strategy. I thought it would trade heavily into these unlocks. However, it is important to emphasize one of the most unique aspects of HYPE: its funding history (or lack thereof) and token launch. There were no VC rounds. The project was bootstrapped by the founders, and all circulating supply was airdropped to users. This proved an excellent user acquisition strategy. It also eliminates VC LPs who require a return of capital from the equation.

I am inclined to think that a combination of (1) founders who have already made significant profits in a transparent manner, (2) the lack of VC investors requiring capital returns for LPs, and (3) the emergence of HYPE DATs will cushion the impact of unlocks in the immediate term (next ~3-6 months).

The other major risk is that adoption of perpetual futures in the U.S. siphons activity away from Hyperliquid to centralized venues. The lack of KYC has been a key feature of Hyperliquid, allowing U.S. traders who otherwise cannot access perps to use a product with excellent UX and deep leverage. We have already seen perps launched by Coinbase, but user metrics on Hyperliquid have not yet declined. This is worth monitoring, but until the data shifts, there is no reason to fade the current strength.

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