Hyperliquid maintained its position as the leading decentralized perpetual futures exchange despite a sharp decline in market share, according to an analysis released this week by DeFi analyst Patrick Scott. The platform retained 62% of open interest across decentralized perp exchanges even as its trading volume share dropped from 45% to 8% in recent weeks.
What to Know:
- Decentralized perpetual futures exchanges have grown from less than 2% of centralized exchange trading volume in 2022 to more than 20% last month, with Hyperliquid driving much of that expansion.
- Hyperliquid's weekly trading volume share plummeted to 8% as Binance-backed competitor Aster reached more than $270 million in weekly trades, while platforms like Lighter and edgeX posted triple-digit percentage gains.
- Scott's investment thesis centers on Hyperliquid's 62% dominance in open interest, which he considers a more reliable measure of platform strength than trading volume, alongside revenue generation and expansion initiatives including HyperEVM and the USDH stablecoin.
Market Dynamics Shift Rapidly
Perpetual futures contracts allow traders to speculate on cryptocurrency prices without expiration dates, differentiating them from traditional futures. These derivatives have become a cornerstone of crypto trading activity. The decentralized platforms hosting these contracts have attracted users seeking alternatives to centralized exchanges like Binance, which have faced regulatory scrutiny and operational concerns in various jurisdictions.
Scott noted the broader market context in his analysis.
The shift from centralized to decentralized platforms accelerated significantly over the past three years. Trading activity on decentralized perp exchanges now represents a substantial portion of the overall perpetual futures market.
Aster's rapid ascent marked the most dramatic recent development. The Binance-affiliated platform captured significant market share within weeks. Other emerging platforms including Lighter and edgeX also recorded substantial increases in trading activity during the same period.
Open Interest as Key Metric
Scott distinguished between trading volume and open interest in his analysis. Open interest represents the total value of outstanding derivative positions that have not been settled. This metric indicates how much capital remains committed to a platform rather than simply passing through it.
"Unlike volume and revenue, which measure activity, open interest measures liquidity. It's much sticker," Scott wrote in his thesis. He emphasized that Hyperliquid's 62% share of decentralized perp exchange open interest demonstrates sustained user commitment despite the volume decline.
The platform continues generating revenue that Scott characterized as strong relative to its valuation. He described Hyperliquid as trading at a reasonable multiple compared to competitors. Revenue and open interest together suggest users maintain positions on the platform even while executing some trades elsewhere.
Hyperliquid issues the HYPE token, which plays a role in platform governance and economics. Scott outlined several initiatives tied to the token's utility and value proposition.
Expansion Initiatives and Future Outlook
HyperEVM represents Hyperliquid's blockchain network expansion beyond perpetual futures trading. The network currently hosts more than 100 protocols with $2 billion in total value locked, according to Scott's analysis. This infrastructure buildout positions Hyperliquid as a broader DeFi ecosystem rather than solely a trading venue.
The USDH stablecoin initiative involves reserves held with traditional financial institutions BlackRock and Superstate. Stablecoins provide price-stable assets for trading and settlement within crypto markets. USDH's backing by established financial entities may address regulatory and stability concerns that have plagued other stablecoin projects.
HIP-3, another proposal Scott highlighted, would create a mechanism for builders to launch new perpetual futures markets by staking significant amounts of HYPE tokens. This design would lock up token supply while expanding the range of tradable assets on the platform. Scott described this as a "supply sink" that could support token value.
Scott identified specific conditions that would invalidate his investment thesis. Material declines in open interest or revenue would signal fundamental deterioration. USDH's failure to gain liquidity over the next year would undermine the stablecoin initiative's viability. He contrasted Hyperliquid's approach with competitors relying on heavy incentive programs to attract users.
Closing Thoughts
Scott's analysis presents Hyperliquid as the strongest investment among decentralized perpetual futures exchanges based on open interest retention, revenue generation and expansion initiatives. The platform faces intensifying competition but maintains structural advantages according to his thesis. Whether these fundamentals prove more important than short-term volume metrics will determine the investment case's validity.