Arthur Hayes and Hanson Birringer on Hyperliquid’s Success (And What Could Stop It) - Ep. 852
🎯 Summary
Podcast Summary: Arthur Hayes and Hanson Birringer on Hyperliquid’s Success (And What Could Stop It) - Ep. 852
This episode of Unchained features Arthur Hayes (CIO of Milstrom) and Hanson Birringer (Head of US Sales at FlowDesk) discussing the meteoric rise of the decentralized perpetual swap exchange, HyperLiquid, following its fair-launch airdrop in November.
1. Focus Area
The discussion centers on Decentralized Finance (DeFi), specifically the success of decentralized perpetual futures exchanges (DEXs), the mechanics of on-chain trading transparency, and the business model that has propelled HyperLiquid to rank among the top global futures exchanges.
2. Key Technical Insights
- HyperCore as a Liquidity Layer: HyperLiquid’s success is attributed not just to its front-end UI but to its underlying technology stack (HyperCore), which allows other applications (via builder codes and upcoming features like HIP-3) to plug in and utilize its liquidity for building novel products, including tokenized equities perps.
- On-Chain Transparency Advantage: The transparency of on-chain trading (visible P&L, liquidation levels) is seen as a net positive, allowing sophisticated actors (like market makers) to strategically place orders (e.g., “stink bids” near liquidation levels) and providing verifiable proof of performance, unlike many KOLs on centralized exchanges.
- L1 vs. L2 Valuation Mindset: The market is currently valuing HyperLiquid as an “L-something” (Layer 1/Protocol) rather than just a DEX, granting it a higher price-to-earnings multiple due to its proven client base and revenue generation capabilities.
3. Market/Investment Angle
- The Power of a Good Airdrop: HyperLiquid’s success is heavily credited to its “fair launch” and airdrop execution, which successfully rewarded retail users based on trading flow, fostering deep community loyalty—a key factor in retaining capital within the growing HyperEVM ecosystem.
- Revenue Concentration: Similar to historical derivatives markets, a small cohort (estimated 10,000 to 50,000 traders) generates the vast majority of revenue for the entire crypto trading ecosystem, and HyperLiquid is currently capturing this high-value segment.
- Valuation Headwind: The primary short-term risk to HyperLiquid’s high valuation (currently around $45B FDV) is the impending launch of regulated perpetual products by major US centralized exchanges like Coinbase and Robinhood, which will target the American retail “degens” who currently rely on HyperLiquid due to jurisdictional limitations.
4. Notable Companies/People
- HyperLiquid: The subject of the discussion, praised for its engineering output (small team generating massive results) and business execution (fair launch, high revenue buybacks).
- Arthur Hayes: Provided historical context on perpetuals and emphasized the importance of making retail users rich to build loyalty.
- James Wynn: The pseudonymous trader whose highly publicized, massive long position and subsequent $13 million loss on HyperLiquid highlighted the platform’s transparency and the cultural phenomenon of leaderboard trading.
- Coinbase/Robinhood: Mentioned as the key centralized competitors whose upcoming US perp offerings pose a direct threat to HyperLiquid’s current user base.
5. Regulatory/Policy Discussion
The discussion directly addresses the regulatory impact: the launch of US-regulated perp exchanges by Coinbase and Robinhood will siphon off a segment of HyperLiquid’s users—specifically Americans who currently use the DEX as an easier alternative to navigating complex on-chain mechanics or who are restricted from CEXs. The debate hinges on whether the overall market expansion (“the pie gets bigger”) will offset HyperLiquid’s loss of market share.
6. Future Implications
The conversation suggests a future where on-chain infrastructure like HyperCore becomes the foundational liquidity layer for various financial products, including tokenized traditional assets (like S&P 500 futures). Furthermore, the social dynamics observed in the James Wynn saga—where on-chain verifiability elevates KOL status—suggests leaderboard trading and performance promotion will become increasingly public and tied to DEX platforms.
7. Target Audience
This episode is most valuable for Crypto/DeFi professionals, quantitative traders, market makers, and crypto investors interested in the mechanics, business strategy, and competitive landscape of decentralized derivatives trading.
🏢 Companies Mentioned
💬 Key Insights
"...and then also getting via builder codes and HIP-3 that tangential liquidity and trading volume and revenue from the US market from people who build compliant KYC front ends for HyperLiquid in the event that perps do get fully regulated and legalized here in the US without even really having to pay for it."
"Versus HyperLiquid, they have to make money. That's the whole point: they make money, they buy back the token. That's why we as holders want to hold this thing and buy it."
"If the vision is just we want to be a very looked-at perp DEX, okay, fine. You're still going to make a lot of money. I don't know if you justify the valuation that you have right now in the face of Coinbase or Robinhood. Like, they could go to zero-fee trading on perps just because Wall Street rewards them for user numbers, not profitability."
"If you do not give away—if you make a lot of money as an exchange, which you should, that's the whole fucking point of this business—and you don't give it to the users, I mean, why am I going to buy another token?"
"But again, if we're able to do it, it's the holy grail, and then they can defensively say, "Hey, we are a decentralized perp, but we don't do fuck all. We just build this tech. We don't lock some markets. We don't provide the liquidity. So don't talk to us.""
"This is the whole game because at the end of the day, if Jeff and his team are making decisions on which perps to launch and when, and all those things, then that's not the—you don't want to be in that space. You want to be like Uniswap, you know, they don't decide what LP pools get listed. They get listed because they have a permissionless protocol..."