Hyperliquid (HYPE) Token Economics and Valuation In-depth Analysis Report

I. Token Economics Model Analysis

Hyperliquid's token allocation model prioritizes the community, balancing short-term liquidity and long-term ecosystem incentives through multi-dimensional design (total supply of 1 billion tokens)

1. Community Airdrop (31%)

• Allocation Scale: 310 million HYPE tokens distributed through genesis airdrop covering 94,000 early users, with no lock-up restrictions, achieving full circulation.
• Strategy Effectiveness: Airdrop mechanism precisely filters genuine users, eliminating 27,000 fake addresses, increasing average user rewards to 26,000 per address, and injecting an average daily on-chain liquidity of 120 million
• Market Impact: HYPE price rose over 900% in the first month after airdrop, becoming one of the most efficient community launch cases in crypto history

2. Ecosystem Incentive Pool (38.888%)

• Dynamic Release Mechanism: 388.88 million tokens for trading mining (45%), developer rewards (30%), and liquidity subsidies (25%), with each $1 incentive driving $5.3 TVL growth, current monthly release proportion at 0.8%
• Fund Efficiency: Ecosystem fund allocated through protocol governance proposals, such as approving $120 million for cross-chain bridge development in Q1 2025, promoting HyperEVM ecosystem compatibility

3. Core Team (23.8%)

• Lock-up Mechanism: 24-month linear release starting November 2025, with 60% concentrated on 2027-2028 unlocking, avoiding short-term market selling pressure
• Team Background: Founder Jeff Yan previously managed $50 billion crypto market maker Chameleon Trading, with technical team including MIT distributed systems PhD and former Citadel quantitative engineers, possessing high-frequency trading and public chain development experience

4. Strategic Reserve (6.3%)

• Technical R&D and Compliance Expenditure: 6% of tokens for HyperBFT consensus algorithm optimization and regulatory compliance framework construction, 0.3% ecosystem fund supporting developer toolchain development
• Liquidity Management: 0.012% HIP-2 liquidity for protocol market-making, maintaining daily average $50 million order depth, reducing market volatility

Token Circulation Dynamics

1. Deflationary Engine

• Buyback and Burn: 97% platform revenue injected into Assistance Fund, single-day buyback peak of $1.4 million in May 2025, cumulative burn of 22.8 million HYPE (6.2% of circulating supply)
• Staking Lock-up: Currently 31% of circulating supply participating in DPoS staking, with 18.9% annual yield, forming a long-term holder moat

2. Circulation Control

• Circulating Supply: As of May 2025, 370 million tokens in circulation (37%), remaining tokens gradually released through incentive pool and team unlocking, with 26% annual inflation, but deflationary mechanism can offset over 80% of new supply

II. Valuation Model Construction

Efficiency Indicators and Industry Comparison

Hyperliquid's core competitiveness is reflected in capital utilization and revenue capture efficiency:

• TVL/Revenue Ratio: 25 (TVL $440 million vs. 7-day revenue $17 million), significantly better than Uniswap (315) and Raydium (345), leading in derivatives track
• Fee Structure: Contract trading fees 0.01%-0.035%, spot auction annual revenue $141 million, creating diversified revenue streams

Discounted Cash Flow Model (DCF)

1. Revenue Forecast

• Trading Fees: Daily average trading volume of $5-10 billion from January to May 2025, annual revenue of $587.5 million; optimistic scenario with market share over 10% could reach $818 million
• EVM Ecosystem: Referencing Base chain revenue model, HyperEVM expected to contribute $54 million in Gas revenue in 2025, 50% of Base chain

2. Adjusted FDV Model

• Supply Reduction: Estimated 41.8 million HYPE burned in 2025, circulating supply reduced to 328 million, adjusted FDV = price × (1 billion - cumulative burn)
• P/E Comparison: Current P/E 30x, lower than BNB (45x) and Solana (55x), potentially dropping to 15-20x if market share exceeds 20%

3. Sensitivity Analysis

• Bull Market Scenario: Trading volume doubles, EVM revenue share increases to 70%, target price $100-120 (corresponding FDV $100-120 billion)
• Base Scenario: 30% annual growth, 2026 target price $79.5, valuation reasonableness higher than traditional fintech stocks (e.g., Coinbase P/E 45x)

III. Investment Value and Risk Analysis

Four Core Investment Logics

Team Strength and Hacker Spirit

• Team developed HyperBFT consensus algorithm, achieving 0.2-second transaction confirmation speed, outperforming Cosmos SDK framework

• Without VC model, achieved $350 million TVL and $50 million profit through HLP vault strategy, proving self-driven ecosystem building capability

Decentralized Exchange Paradigm Breakthrough

• On-chain order book model processes 200,000 trades daily, open interest (OI) reaching 10% of Binance, capital retention capability exceeding CEX

• Zero gas fee design attracts high-frequency traders, daily 50x leverage trading over 60%, industry-leading user stickiness

Compliance and Web3 Native Value Balance

• Full-chain asset custody avoids regulatory risks, anti-censorship characteristics attracting $1.8 billion institutional fund migration

• Dynamic geographic fence technology blocking high-risk jurisdictions, complying with US SEC guidelines

Dual Engines of Ecosystem Expansion

• HIP-1 standard supports one-click token issuance for Azuki, Solv, etc., MEME token Purr 24-hour trading volume exceeding $120 million

• After HyperEVM launch, developers can invoke on-chain order book liquidity, giving birth to new DeFi primitives like "Liquidation as a Service" (LaaS)

Risk Warnings

1. Validator Centralization: Currently 4 mainnet validators controlled by the team, potential impact on performance stability during decentralization transition
2. Immature Ecosystem: Insufficient HyperEVM toolchain completeness, potential limitation of valuation ceiling if unable to attract quality developers
3. Token Unlock Pressure: Team token release begins November 2025, need to observe if buyback intensity can offset potential selling pressure

IV. Market Strategy Recommendations

1. Holding Period

• Short-term (0-6 months): Monitor HyperEVM ecosystem launch progress, increase position to 30% if Gas revenue exceeds expectations
• Medium to Long-term (6-18 months): Each 1% market share increase brings 3-5x token price elasticity, recommended holding until 2026 bull market cycle

2. Buying Strategy

• Dip Buying: If price falls to $30-35 support level (corresponding to P/E 25x), build position in batches
• Breakout Chasing: When market share exceeds 5% or TVL reaches $1 billion, price may enter acceleration channel, can add to target position of 50%

3. Position Management

• Conservative: Configure 5-10% portfolio weight to hedge CEX policy risks.
• Aggressive: 20-30% weight, betting on the realization of the "on-chain Binance" narrative.

V. Conclusion

Hyperliquid reconstructs the value capture paradigm of decentralized finance through a dual design of token deflationary mechanism and high-performance public chain. Its cash flow model with 97% of revenue used for buybacks, coupled with the ecological expansion potential of HyperEVM, provides HYPE with a 3-5x valuation improvement space by 2025. Despite the risks of validator transition and token unlocking, its technological moat and community consensus strength have significantly led similar projects. For investors who recognize the "irreversible on-chain" trend, HYPE is an indispensable alpha asset in crypto asset portfolios.