Hyperliquid (HYPE) price is currently trading around $47, prompting questions from investors about its future trajectory. Gerhard from Bitcoin Strategy's latest analysis suggests that Hyperliquid's increasing popularity presents both significant opportunities and potential risks. His research delves into the Hyperliquid token and the market dynamics that will influence its price.
Gerhard characterizes Hyperliquid as the premier decentralized perpetual futures exchange, a platform enabling traders to speculate on cryptocurrency prices with leverage. While leverage amplifies excitement, it also transforms opportunities into risks.
Trading volumes on decentralized perpetual futures exchanges are experiencing growth that outpaces cryptocurrency prices. This indicates a rising number of traders are utilizing leverage to bet on both upward and downward price movements. However, as Gerhard highlights, this trend contributes to a more volatile market.
Currently, Hyperliquid has 2.5 times more long traders than short traders. When an excessive number of traders anticipate price increases, even a minor dip can trigger a cascade of liquidations. This scenario was observed during a recent flash crash, where altcoin market capitalizations plummeted by nearly half within hours.
Gerhard's assessment indicates that the entire event underscored the growing interdependence between perpetual futures and spot markets. Once liquidations begin, arbitrage bots exacerbate the situation by selling in the spot market, creating a domino effect.
How the HYPE Token Fits Into the Picture
The HYPE token is central to Hyperliquid's ecosystem. Traders utilize it to reduce their trading fees through staking. The more HYPE a trader stakes, the greater their fee discount becomes. This mechanism generates consistent demand for the token, provided trading activity remains robust.
However, Gerhard cautions that the token faces a potential "ceiling." It has historically struggled to outperform the broader altcoin market for extended periods. Despite a 27% increase last week, available data suggests that this momentum may decelerate. The total value locked (TVL) on the platform has stabilized below $5 billion, and open interest has sharply declined from $15 billion to $6 billion following the crash.
This reduction signifies fewer active positions, a clear indicator that traders' risk appetite is diminishing.
Upcoming Token Unlocks Could Add Pressure
Gerhard points to a significant concern: upcoming token unlocks. Beginning in November, the Hyperliquid team is scheduled to receive $427 million worth of HYPE tokens monthly. Within a year, they will hold over 20% of the total supply.
For a project with a $16 billion market capitalization and a $48 billion fully diluted valuation, this represents substantial potential selling pressure. Gerhard notes that while the team may not sell all tokens immediately, even gradual selling can exert considerable downward pressure on the price.
The valuation comparison also raises questions. Hyperliquid's fully diluted valuation is approximately seven times higher than Uniswap's, despite Uniswap's continued dominance as a spot exchange. Gerhard suggests that such a disparity may be difficult to sustain over time.
Why HYPE’s Valuation Might Be Hard to Sustain
While Hyperliquid continues to achieve platform growth, Gerhard distinguishes this success from the HYPE token's price potential. He argues that strong product adoption does not always translate to token performance, particularly when the token supply is continuously expanding.
He references a common pattern observed across altcoins: steady market capitalization growth even as prices decline. The underlying reason is straightforward: new tokens enter circulation weekly, diluting existing value. Across the altcoin market, approximately $1 billion worth of tokens unlock each week. If new buyer demand does not match this pace, prices tend to decrease.
Gerhard cites examples such as WorldCoin, whose market capitalization increased while its price fell from $10 to below $1. This same dynamic could impact HYPE once the token unlocks begin.
Could the HYPE Price Still 2X?
Gerhard does not entirely dismiss the possibility of short-term gains. Momentum remains positive, and open interest on HYPE is recovering more rapidly than for many other assets. Traders who effectively manage their risk can still capitalize on brief periods of volatility.
However, he emphasizes that the potential for upside may be limited when compared to the downside risk. The combination of a high valuation, significant upcoming unlocks, and substantial leverage creates a fragile market environment.