Source: TradingView, CNBC, Bloomberg, Messari
Buying The Dip
Digital assets were broadly flat to slightly lower last week, but hidden in the overall returns was quite a bit of dispersion. For example, the TRUMP token fell -26% after surging the week before on the added utility of the token (dinner with POTUS), while Hyperliquid (HYPE) continues its run higher gaining +14% week-over-week on a combination of higher volumes/buybacks and a new fee rollout. Most Layer-1 and Layer-2 blockchain tokens fell 5-10%, while SOL and ETH were basically flat. Highly inflationary tokens and tokens with big investor unlocks fell 10% or more (i.e. OP, ENA, TIA, BERA), while AI was mixed, with some down double digits while others posted double-digit weekly gains.
Source: Arca Internal Calculations
But the big story in the capital markets is the U.S. equity strength,
bouncing 12% from the April intra-month lows, and notching another 3% gain last week. We mentioned last week that
equities will likely have a fairly binary outcome (either we’re in the calm before a 2H storm, or the 1Q selloff is much ado about nothing as every tariff-related scare gets dialed back). The relentless dip buying by retail investors has thus far been the more accurate take compared to the selling pressure and
increased bearishness from institutional investors. And that’s likely the right move, based on history. Bear markets pale in comparison to bull markets, both in market movement and duration. Said another way, buying the dip almost always works, regardless of the reason.
Source: Creative Planning
As it pertains to crypto, we’ve written a lot in the last 18 months about how damaged the crypto investor universe is. The PTSD from 2022 still lingers, and it has convinced many fast money traders to sell every rip, and convinced many longer-term investors to just stay away.
But in our opinion, it’s just a matter of time before crypto investing returns look a lot like the above equity chart, too. The tides are shifting, and the increased focus on cash flows and fundamental tokenomics, combined with an expected new crop of better-designed tokens, will likely lead to long-term gains with shallow dips. It’s time to stop pretending the whole industry is made up of just Bitcoin and memecoins, and it’s certainly time to stop believing in completely made-up 4-year cycle theories. This industry will thrive for decades via revenues and buybacks, driven by incentives and customer bootstrapping.
For whatever reason, many investors expect to invest in innovation without volatility, and that’s why they prefer venture investing and private investing over liquid markets. Even though everyone knows these private funds aren’t really less volatile just because they don’t mark their books regularly, the perception still carries water for many institutional investors. But retail investors don’t care about, or don’t have access to, private funds and venture capital. And they are increasingly less interested in real estate now that the 40-year interest cycle decline has come to an end. That leaves stocks and crypto. Investing in a brokerage account or via a crypto exchange has never been easier thanks to online access, so this “buy the dip” mentality may never go away. Many value investors still benchmark P/E ratios against 100-year historical valuations, but fail to recognize that investing in stocks is 100x easier today than it was 30 years ago, and these higher valuations may persist indefinitely simply due to the amount of money chasing the same investments.
Hyperliquid (HYPE)’s Dominance
Over the last two weeks, we have discussed
Gary Gensler’s legacy and his negative impact on token economics, as well as
Raydium’s new launchpad product and the potential revenues and buybacks that follow. Continuing our focus on fundamental investments this week, we turn our focus to another revenue generator: Hyperliquid (HYPE).
Hyperliquid is a decentralized perpetual futures exchange that operates on its own custom Layer-1 blockchain, purpose-built for high-performance trading. Hyperliquid dominates the decentralized derivatives market, capturing over 80% of the perpetual market share by volume.
Not only has Hyperliquid captured nearly all of the decentralized derivatives (DDEX) market share, but it is also the first truly decentralized exchange to seriously compete with centralized exchanges.
When trading on Hyperliquid, users pay an average fee of 0.0224% (as of April 2025). In April, Hyperliquid recorded $191 billion in trading volume, generating $43 million in topline revenue. These volumes are just 5% below Hyperliquid’s ATH monthly volumes, while names like DYDX have seen their volumes decrease 44% over the same period. What is even more impressive is that 97% of revenues are passed through to tokenholders in the form of a buyback. Using the past 30 days, this has created ~$1.3M per day in HYPE buybacks. After launching at the end of November, the assistance fund (where the buybacks take place) has already bought back 6.45% of the circulating supply.
However, these fees are about to change. On May 5th, Hyperliquid will update its fee structure and staking mechanisms. Staked HYPE will now offer features similar to centralized exchange (CEX) tokens, where staking certain amounts will provide trading fee discounts, further aligning the interests of Hyperliquid’s tokenholders and users.
Fees will also be increasing. Before applying any staking-based discounts, taker fees will rise by an average of 32.7% across the fee tiers, while maker fees will increase by 35%. Despite these changes, the average take rate across the exchange will remain competitive with centralized exchanges and significantly lower than most other decentralized derivatives platforms. After factoring in staking discounts, we expect effective fees to increase by only 10–20%.
This token economics change presents very little downside for Hyperliquid and its tokenholders. In order for fees and revenues to decline from the staking discount, volumes of the exchange would have to average at the platinum tier of holding more than 100K Hype (currently $2 million). Given current buyback activity and the presence of long-term fundamental holders, acquiring that much HYPE will be a significant challenge for most users.
Overall, Hyperliquid is a real business, with real cash flows that are being returned to token holders. It has captured the entire decentralized derivatives market and is now competing with centralized exchanges. Looking ahead to May 5th, fees will either rise significantly, fueling further buyback growth, or prompt increased demand to buy and stake HYPE. Both outcomes will be viewed positively. With HyperEVM gaining traction, BNB is quickly becoming the only meaningful comparable for HYPE.
