In-depth look at the Multicoin report: Hyperliquid (HYPE) has potential for a fivefold upside

By: Multicoin Capital
Compiled by: Felix, PANews
Multicoin Capital built a position in Hyperliquid at the beginning of this year and has continued to increase its holdings. Today, HYPE has become one of the largest positions in its liquidity fund. Recently, Multicoin Capital released a comprehensive analysis and valuation report for Hyperliquid (HYPE).
The report states that HYPE is currently trading at around $63, with a P/E ratio of about 36x (based on earnings over the past 12 months). If the already effective Coinbase/USDC agreement is taken into account, the P/E ratio is about 30x. It is expected that by 2028, HYPE’s annual revenue will reach approximately $8 billion, which means that at a 20x P/E ratio, its price would be about $319.
The full report is 44 pages long, and PANews has compiled the key takeaways from it.
Hyperliquid is a vertically integrated Layer 1 blockchain and decentralized exchange, built specifically for high-speed trading. 2025 will be a breakout year for Hyperliquid.
Over the past 12 months, Hyperliquid’s trading volume has been about $2.9 trillion and its revenue about $873 million. All of these profits flow to token holders, placing the protocol among the most profitable exchanges in the crypto, CeFi, or DeFi space.
Hyperliquid’s user count grew from about 301,000 to about 923,000, and the year-end open interest size was about $6 billion. Today, Hyperliquid controls over 59% of the DeFi trading market’s open interest (OI), and its roughly $9.6 billion OI exceeds the combined total of all major on-chain competitors.
Last year, Hyperliquid took a sizable market share from CEXs (centralized exchanges)—its monthly trading volume has reached about 17% of Binance, up from nearly zero two years ago. OI has also reached about 21%.
Hyperliquid’s growth is not limited to Binance: compared with all CEXs, Hyperliquid’s trading volume and OI share have both hit historical highs.
Hyperliquid’s core business has annual revenue in the billions of dollars, but several recent catalysts will continue to drive substantial growth. Its product roadmap includes multiple catalysts that could significantly expand the protocol’s total addressable market within the next 12–24 months, increase capital inflows, and raise its revenue base. There are currently eight major catalysts, and more may emerge over time.
Catalysts
1. HIP-3: A permissionless trading venue
Hyperliquid Improvement Proposal 3 (HIP-3) was introduced in October 2025 and is the most important upgrade the network has seen to date. Before HIP-3, the creation of new markets was controlled by validators, who decided which assets could be listed and set key parameters. With HIP-3, deploying trading on HyperCore becomes permissionless. Any entity staking more than 500,000 HYPE can deploy new perpetual market contracts and has full control over oracle configuration, leverage limits, and risk settings. Fees are split 50/50 between the deployer and the protocol. 
HIP-3’s development has been impressive. Its open interest (OI) grew from nearly zero at launch to over $2.9 billion in just six months—an increase of more than 100x. Among the top 30 markets on Trade.xyz, crypto accounts for less than half; the rest are commodities, stocks, and index markets.
During peak trading periods, the trading volume on the HIP-3 market is nearly half of all trading activity on Hyperliquid. Currently, its OI accounts for 33% of Hyperliquid’s total open interest.
2. HIP-4: Prediction markets and options
HIP-4 was released in early 2026 and allows developers to build prediction markets and options directly on HyperCore. This upgrade adds event-result-based contracts—fully collateralized instruments with predefined payout structures and fixed dates. Traders can use collateral from their positions to participate in prediction markets without moving funds elsewhere. Independent platforms like Polymarket cannot offer this kind of cross-margin functionality.
The potential market size here is enormous. Currently, prediction markets have monthly trading volume as high as $21 billion. Crypto options have monthly trading volume exceeding $180 billion at their peak. Coinbase’s $2.9 billion acquisition of Deribit is further proof of the market’s value. If Hyperliquid can replicate even a small portion of its achievements in the perpetuals space within prediction markets or crypto options, its revenue potential would be substantial—especially since both markets can command higher fee rates.
3. Portfolio margin
Portfolio margin may be Hyperliquid’s most underestimated catalyst. This feature has existed on CEXs for years, but it is much harder to implement on-chain. Portfolio margin allows users to use their entire margin balance at once, rather than allocating margin separately to each position like in traditional trading.
In addition, any unused portfolio margin balances on Hyperliquid automatically earn yield via the lending protocol whenever users are not trading, improving capital efficiency.
4. Coinbase USDC partnership
Last year, Hyperliquid ran a bidding process to select a native stablecoin partner. Hyperliquid ecosystem company Native Markets won the bid and launched USDH. The idea is simple: the Hyperliquid exchange has billions of dollars’ worth of stablecoin collateral, and historically, most of the yield from those floating funds flowed to Circle and Coinbase via USDC. USDH was the first attempt to bring some of that yield back to the Hyperliquid ecosystem.
In May this year, Coinbase stepped in and became Hyperliquid’s official USDC capital deployment partner. Native Markets is gradually exiting that role, and Coinbase has the right to acquire USDH brand assets. As a result, Hyperliquid retains USDC as collateral, which users know and trust, while regaining much of the floating income that previously flowed entirely to Circle and Coinbase.
This is meaningful for two reasons. First, this is real revenue. While specific numbers have not been disclosed, the Aligned Quote Asset documentation mentions roughly 90% of revenue share. If we assume there is about $6.13 billion worth of USDC collateral on the Hyperliquid platform and the total Treasury yield is 3.65%, then a 90% revenue share implies the protocol can earn more than $200 million in revenue per year. Second, this indicates Hyperliquid has the ability to complete important commercial deals.
5. Builder Codes
Builder Codes allows third-party frontends to route order flow to Hyperliquid in exchange for a share of fees. In practice, Hyperliquid keeps the liquidity layer while outsourcing distribution. Any wallet, trading app, or aggregator can connect to the same underlying CLOB (central limit order book) and earn a portion of the revenue from it.
The largest Builder Codes operators currently include Phantom, MetaMask, Insilico, Based, and Hyperdash. Together, they drive roughly eight-figure daily trading volume for Hyperliquid. Just Phantom alone has more than 17 million monthly active users. Since launching in July 2025, its integrated cumulative trading volume with Hyperliquid has exceeded $43 billion, generating about $22 million in revenue for Phantom.
So far, Builder Codes has not achieved massive success like HIP-3. However, the building blocks for success are already there. Historically, most crypto frontends have made money by acting as brokers and/or as exchanges. As emphasized multiple times earlier, trading is the most profitable business in this industry. Most wallets, new banks, frontends, aggregators, and similar platforms want users to be able to access perps. Instead of building a brand-new derivatives DEX, obtaining liquidity (and possibly paying for it), getting distracted by tokens, and all the other overhead—order-flow engine operators can simply route trades directly to the perps platform with the highest liquidity, and Hyperliquid is undoubtedly one of the best in that category.
This model is strategically significant for Hyperliquid because it means the core team doesn’t need to directly acquire users—just maintain sufficient liquidity. This flywheel effect can keep compounding: more builder integrations lead to more trading volume, which deepens liquidity, improves execution efficiency, and attracts even more builders.
Builder Code’s operating mechanism is the same value-capture mechanism as Binance Link’s ecosystem—except here it is permissionless, and the rewards are shared at the protocol layer rather than shared through bilateral customized business development agreements.
6. HyperEVM
As of early 2026, more than 175 teams have deployed applications on HyperEVM. The main value of HyperEVM lies in its composability with HyperCore. By reading precompiled programs, smart contracts can access real-time CLOB data, including prices, positions, and margin information, avoiding cross-domain latency issues. Because these applications run on the same chain as the exchange, they can directly use Hyperliquid’s liquidity, prices, and CLOB. Lending protocols can use real-time prices for liquidations; structured products can hedge within a single transaction through the CLOB; and stablecoins can rely on Hyperliquid’s native price data source rather than external oracles.
This ecosystem is still in its early stages, and interoperability between HyperCore and HyperEVM is still under development. But as integration deepens, Hyperliquid will gain advantages that other derivatives trading platforms do not have: a vertically integrated financial architecture where the exchange, the risk engine, and the DeFi application layer run within the same system. Every new application built on HyperEVM will bring Hyperliquid new inflows of capital and create new demand for HYPE.
7. Regulation and institutional adoption
Hyperliquid seems to place similar importance on regulation. The Hyperliquid policy center, led by Jake Chervinsky, was established in Washington, D.C., indicating that this ecosystem does not want to stay outside the United States forever. Its goal is to educate policymakers and regulators about DeFi markets, perpetual contracts, and on-chain financial infrastructure. Hyperliquid is dedicating significant resources to argue that DeFi perpetuals can be integrated into the U.S. regulatory framework.
Timing is worth watching as U.S. regulators begin to take a more proactive stance toward perpetual contracts. In May 2026, the U.S. Commodity Futures Trading Commission (CFTC) allowed registered CeFi exchanges to launch truly bitcoin perpetual contracts, followed quickly by perpetual contracts for other major digital assets.
8. ETF
Most traditional asset management firms, registered investment advisers (RIAs), family offices, hedge funds, asset allocators, and similar players find it hard to buy and custody HYPE, trade it in offshore venues, and—most importantly—handle any complex operational requirements. Even though Coinbase has recently listed HYPE, many institutions still prefer not to trade on native crypto exchanges or hold the token directly.
But that barrier is gone now. In May 2026, 21Shares’ Hyperliquid ETF began trading on Nasdaq, followed by Bitwise’s BHYP listing on the New York Stock Exchange. Grayscale’s HYPG Hyperliquid Staking ETF also began trading. From any angle, the launch of HYPE ETPs has been a huge success.
Notably, the spot HYPE ETF absorbed more than 1% of the HYPE supply within the first 10 trading days—one of the strongest debut performances by any spot crypto ETF to date.
Risks
1. Decentralization and governance
Hyperliquid is often criticized as “centralized.” As of June 2026, the network has 27 validator nodes, versus only 4 at launch. That is several orders of magnitude fewer than Ethereum’s roughly 887,000 validators or Solana’s 742 validators. For the first two years the network has run, the node code remained closed-source. As the JELLY event suggests, a small group of validators can gather within minutes to reach consensus on market and blockchain mechanisms.
2. Regulation
Hyperliquid is currently in a regulatory gray zone. As a permissionless on-chain trading protocol, anyone around the world can directly access its network. The frontend typically blocks users from restricted regions such as the United States, but it is difficult to determine how many users or how much trading activity comes from restricted regions—either through direct access or by using proxy settings to bypass geographic restrictions.
Perps are still the flagship product, but their legal status is not yet clear—especially in how U.S. law interprets swaps and futures. As mentioned earlier, the U.S. CFTC recently approved a regulated CEX trading large digital-asset trading protocol. However, that authorization does not cover U.S. users accessing offshore trading venues or on-chain protocol products. Even though the CFTC categorized the newly authorized trading protocol as futures, the Chicago Mercantile Exchange (CME) immediately sued the CFTC over the authorization, emphasizing that it believes the trading protocol was misclassified as futures. If the U.S. CFTC takes enforcement action against Hyperliquid’s protocol, the protocol developers, or its validators, it could have a material impact on the platform’s growth and the value of HYPE.
3. Competition
Exchanges have historically been the most intensely competitive market in crypto. Many CEXs and DEXs once held dominant positions, but eventually the market eliminated them all. Mt. Gox, Bitfinex, and dYdX are all cautionary examples. Binance is the exception—it has held the market leadership position for eight straight years. Despite years of regulatory and legal challenges, it remains a highly efficient, well-capitalized company. Multicoin Capital believes Binance may be Hyperliquid’s biggest long-term threat.
In decentralized exchanges, Aster and Lighter are the two most notable competitors. Aster is backed by YZi Labs and has CZ’s support. It briefly captured about 70% market share of DeFi trading platforms in September 2025, before gradually declining. Lighter was created by former Citadel engineers and backed by a16z and Lightspeed, with a valuation of $150 million. It uses zero-knowledge proofs (ZKPs) for trade verification and uses a zero-fee model. There are also some reputable derivatives DEXs on Solana, including Phoenix, Drift, and Bulk Trade, but none of them have reached significant scale yet. These exchanges mostly rely on certain feature upgrades in Solana’s market structure, including improvements to some large validator clients (Agave and Firedancer) and Jito’s BAM infrastructure. These upgrades would enable Solana DeFi derivatives trading platforms to provide some features Hyperliquid already has, such as order-cancel priority.
In addition, more regulated derivatives exchanges may emerge in the United States in the future and offer truly perpetual contracts. Early signs of this are already visible in Kalshi and Coinbase. If the Chicago Mercantile Exchange (CME) and Intercontinental Exchange (ICE) begin offering DeFi trading to U.S. traders, they could attract demand before Hyperliquid enters the U.S. market.
4. HyperCore/HyperEVM interoperability
Ethereum and Solana have reached such massive scale largely thanks to the thriving third-party developer ecosystem built on top of them. Hyperliquid has not yet built an ecosystem at that scale.
HyperEVM might be able to solve this problem, but the interoperability and composability between HyperEVM and HyperCore are still not fully addressed. Reading precompiles allows HyperEVM smart contracts to access HyperCore’s state, but write capabilities (i.e., EVM contracts’ ability to place orders on HyperCore or modify positions) are still under development. Until this bridge is fully built, the depth of integration between HyperEVM applications and the core exchange will be somewhat limited.
5. Token value capture and dilution
The investment value of HYPE depends on the durability and credibility of its value-capture mechanism. If the token economy is weakened by dilution, misaligned incentives, or governance decisions, HYPE may be unable to capture the economic value generated by the platform—or the value captured could be lower than investors expect.
The primary dilution concern is the contributor unlock schedule. Core contributors will receive about 9.92 million HYPE per month until 2028; at current prices, that implies roughly $625 million per month in potential selling pressure. Whether a buyback-and-burn mechanism can offset this supply expansion depends on whether fee growth exceeds the unlock pace, but it is still far from achieving that target at the moment.
6. Bad debts
In some respects, Hyperliquid faces a higher bad-debt risk than CEXs. CEXs can use KYC, account-level controls, withdrawal review, internal risk teams, and in some cases take legal action against known counterparties. Hyperliquid lacks these tools because anyone can deposit collateral, use leverage, and trade.
As more assets are listed on Hyperliquid, especially after HIP-3 and HIP-4, this becomes particularly important. The market’s long tail will include assets with weaker liquidity, less reliable reference price reliability, more concentrated ownership, and larger event-driven gap risks. If traders build large positions in markets with insufficient liquidity and the market price gaps through the liquidation level, the protocol could face bad debts. In CEXs, they can sometimes slow withdrawals, cut account losses, pursue user responsibility, or use risk controls outside the platform. Hyperliquid needs to solve more of these issues at the protocol and market design layers.
HYPE token
Since the team has never raised external funding, there are no tokens allocated to investors. The total supply of 1 billion tokens is allocated as follows: 31% air-dropped to early users at launch (310 million tokens, fully unlocked); 38.9% reserved for future community issuance; 23.8% allocated to core contributors; and the remainder for foundation and ecosystem grants. Team tokens are locked for one year from launch, with unlock periods extending through 2027 and 2028. Core contributors receive about 9.92 million HYPE tokens per month—worth about $625 million at current prices.
HYPE plays five distinct roles in the Hyperliquid ecosystem:
1. 99% of protocol revenue is used to buy back and burn HYPE tokens via an endowment fund, and the remaining ~1% is used to support protocol operations and related business expenses.
2. Unlock trading fee discounts by achieving staking tiers—encouraging traders to hold and stake HYPE rather than sell.
3. HYPE is the gas token for all trading on Hyperliquid L1.
4. HYPE can be staked to secure the network and earn yield. Validators must stake at least 10,000 HYPE to participate, while delegators receive staking rewards through protocol inflation and trading fee distributions. The current staking APY is about 2.25%, and the yield adjusts dynamically based on total staked amount.
5. HYPE gives validators governance rights over protocol upgrades and changes. Validators participate in stake-weighted voting, covering items such as delisting markets and parameter changes.
Valuation
Multicoin Capital’s valuation uses a cash-flow multiple method, consistent with the approach used in prior BNB and DRIFT reports. It assumes 99% of protocol revenue will continue to be distributed to HYPE token holders via the buyback-and-burn mechanism.
The baseline assumptions are based on the following four relatively conservative premises:
By 2028, total crypto derivatives trading volume will grow at a 35% CAGR.
By 2028, derivatives DEXs will account for 32% of the crypto derivatives market, up from the current ~16%.
Hyperliquid maintains about a 30% share in the derivatives DEX market.
USDC balances on the Hyperliquid platform will grow broadly in line with trading volume.
Target price
HYPE is currently around $63, with a market cap of about $32 billion, while its earnings are $869 million. Based on the past 12 months’ earnings, its P/E is about 36x (based on current circulating supply). If we include Coinbase’s trading, HYPE’s forward expected P/E is about 30x.
Multicoin Capital values HYPE’s 2028 protocol earnings using a 20x P/E, projecting earnings of $8 billion. For reference, COIN’s current P/E is about 24x, CME’s is about 17x, and HOOD’s is about 32x. These companies are not perfectly comparable, but they provide useful benchmarks for how public markets value large exchanges and trading platforms.
For a company that is already profitable, still growing at an astonishing pace, with such high operating leverage, high-quality token value capture, and many unrealized catalysts embedded in the business, a 20x valuation multiple is quite reasonable.
Under the baseline assumptions, using earnings of $8 billion, a 20x valuation multiple implies a valuation of $160 billion. Based on an adjusted supply of 502 million tokens, this means HYPE’s price will exceed $319. Under conservative assumptions, there is more than a 5x upside from current levels.
To illustrate the sensitivity of this analysis, the following shows both bearish and bullish cases using different assumptions.
In a bearish scenario, by 2028 the overall CAGR of the crypto derivatives market is only 10%, and the DEXs’ market share reaches only 20%. It is also assumed that HIP-4 or HyperEVM gas will not contribute meaningfully. Similarly, USDC growth would be linearly related to trading volume growth. Under these bearish assumptions, Hyperliquid would generate about $2.73 billion in protocol revenue. At a 20x P/E, its adjusted market cap would be about $55 billion—about $109 per HYPE token.
In the bull case, driven by the factors discussed in this report, the derivatives market would experience explosive growth. Assume its CAGR reaches 50%. Also assume that derivatives DEXs capture 50% of the total crypto derivatives market. Based on these assumptions, earnings would be about $17.3 billion. At a 20x P/E, its adjusted market cap would be about $346 billion—about $689 per HYPE token.
Bear case: A 20x P/E on earnings of $2.73 billion implies an estimated valuation of about $55 billion, or about $109 per token.
Base case: A 20x P/E on earnings of $8 billion implies an estimated valuation of about $160 billion, or about $319 per token.
Bull case: A 20x P/E on earnings of $17.3 billion implies an estimated valuation of about $346 billion, or about $689 per token.
Options and prediction markets enabled by HIP-4 have not yet reached scale, portfolio margin is still in an early stage, and new HIP-3 deployers are expanding. All of these represent upside that is not included in the base case.
In summary, Multicoin Capital believes the market is undervaluing HYPE. Currently, HYPE’s P/E is broadly in line with mature DeFi protocols, even though it has a higher growth rate, a stronger product suite, and better token value realization capabilities. Its pricing is also similar to traditional exchanges and brokers, while innovation at traditional exchanges and brokers is less than that of Hyperliquid. The risk-reward profile looks attractive because it already has a clear foundation of cash flows that limits downside risk, while upside potential depends on the growth of on-chain derivatives and how much market share Hyperliquid can win.
Summary
Hyperliquid is the most important crypto exchange since Binance. Binance’s rise is impossible to ignore. In 2017, Binance went from zero to becoming the dominant CEX in just six months. At the time, the market did not fully appreciate how quickly liquidity can accumulate, the strong “flywheel effect” between product quality and trading volume, and the immense value that the BNB token could create. Multicoin Capital published its BNB report in 2019, when BNB was priced at $10; today it trades at roughly $563.
Hyperliquid is emulating a similar model, but with structural advantages that Binance never had. It is non-custodial: trading is fully executed on-chain and is verifiable. Fees flow directly to token holders through an automated daily buyback mechanism—without any layer of equity in between. In addition, Hyperliquid is expanding into commodities, stocks, prediction markets, and options—areas that CEXs often struggle to enter due to licensing and regulatory constraints.
Multicoin Capital is excited about Hyperliquid’s current trajectory, but the bigger opportunities still lie ahead. The RWA-linked open contracts on HIP-3 have already exceeded $2.9 billion, while permissioned S&P 500 index trading pairs launched last week and saw daily trading volume of over $100 million. HIP-4 will add prediction market and options functionality, and a portfolio margin mechanism will close the functional gap versus CEXs. Builder Codes and HIP-3 also expand distribution channels by allowing wallets and third-party applications to route order flow directly to Hyperliquid. Together, these initiatives form two main growth paths: (1) vertical expansion into newer markets like options and prediction markets, and (2) horizontal expansion into TradFi.
These catalysts reinforce each other. New products and broader distribution channels bring more trading volume to the platform. More volume generates more fees, and those fees are used to buy back and burn HYPE. As the ecosystem grows, Hyperliquid becomes increasingly attractive to traders, builders, market makers, and institutions—creating a powerful flywheel effect.
Of course, there are also risks. Hyperliquid still faces many open questions, including decentralization, governance, regulatory clarity, intensifying competition, and whether HyperEVM can develop into a robust ecosystem. The report discusses these risks and argues they are manageable compared with the potential upside. The team has successfully handled various manipulation attempts, fought a fierce battle for market share against Aster, and navigated early challenging bear markets. In every case, the team has been able to respond quickly and emerge even stronger, demonstrating its resilience and drive.
For all the reasons above, Multicoin Capital is bullish on HYPE and expects it to significantly outperform the entire crypto market in the coming years.
Further reading: Research: How far is Hyperliquid from replacing Binance as the price-discovery hub?