HYPE Flywheel

Source: Finn Grant, Arkham; Translation: @金色财经xz

HYPE continues to hit new all-time highs. As its market cap reaches $18 billion, this article will delve into the flywheel effect that has driven the token higher during the overall market downturn.

HYPE is the native token of the Hyperliquid network, which recently hit a record high of $75, just days after its previous peak. During this process, HYPE's market cap surpassed Dogecoin (DOGE), making it the ninth-largest cryptocurrency by market cap.

All of this is happening against the backdrop of a declining overall market, with BTC and ETH continuing to fall amid uncertain economic and geopolitical prospects.

There are many reasons why HYPE has outperformed the broader market. The core point of this article is that strong network usage, institutional adoption, disruptive impacts on traditional finance (TradFi), and the grand narrative of "super-apps" together foster a positive market sentiment around the Hyperliquid ecosystem.

By combining these factors with the HYPE Assistance Fund's buyback mechanism, a positive feedback loop is formed. Below, we will explore the composition of the Assistance Fund and its potential role in driving HYPE's price performance.

1. What is the Assistance Fund?

The Assistance Fund is a protocol-level buyback mechanism, where up to 99% of trading fees from Hyperliquid spot and perpetual markets are used to repurchase HYPE tokens from the open market. In Q1 2026, the protocol repurchased a total of $192.25 million worth of HYPE.

2. Diversified network revenue

A key component of this flywheel is the emergence of commodities, stocks, and Pre-IPO contracts on Hyperliquid. These contracts mean that even during broader crypto bear markets, Hyperliquid's usage continues to grow.

Recent geopolitical instability has brought massive trading volume to the Hyperliquid ecosystem, attracting thousands of new traders into perpetual DEX trading.

According to Grayscale research, in February, Hyperliquid's silver perpetual contracts traded over $4 billion daily. This momentum accelerated during the Middle East crisis on April 9, when 24-hour trading volume of crude oil perpetual contracts surged above $4 billion—briefly surpassing Bitcoin perpetual contracts.

As detailed in our article on crude oil perpetual contracts, huge oil trades occurred on Hyperliquid before and after the outbreak of war. Since Hyperliquid supports 24/7 trading, it became a key venue for crude oil price discovery over the weekend—when traditional markets are fully closed.

Since launch, HIP‑3 has accumulated over $275 billion in trading volume, with more than 140 active trading pairs. Because most trading fees are funneled back into buybacks via the Assistance Fund mechanism, the HYPE token itself benefits from HIP‑3 trading volume.

3. Institutional inflows and ETFs

Institutional interest provides additional momentum. Key institutions absorbing HYPE liquidity include Bitwise, Grayscale, and 21Shares. Grayscale's ETF has not yet launched, but Grayscale is accumulating HYPE in preparation. You can track these on-chain settlements via Arkham Intel. The screenshot below shows recent inflows into the Bitwise BHYP ETF address, which currently holds $40 million worth of HYPE.

According to SoSoValue, since its launch on May 12, the total net assets of the US spot HYPE ETF have reached $122 million. This new institutional capital, by absorbing supply from the open market and pushing prices higher, adds momentum to the flywheel, attracting more traders to USDC/HYPE trading pairs and increasing network liquidity.

4. Pre-IPO markets

Trading Pre-IPO stocks on Hyperliquid also boosts network usage and injects more energy into the flywheel. These markets provide traders who previously couldn't participate with diversified channels to speculate on private equity.

Trade.xyz is the main provider of Pre-IPO perpetual contracts on Hyperliquid, a decentralized perpetual DEX built on Hyperliquid Layer-1. Its SpaceX perpetual contract currently has an open interest of $65 million.

Pre-IPO perpetual contracts can reflect market expectations of a company's listing price in real time. The recent listing of Cerebras demonstrates the accuracy of these expectations.

On May 1, Trade.xyz launched the Cerebras perpetual contract at a reference price of $175. Cerebras set its IPO price at $185 on May 13, with the opening price the next day at $350—almost double the IPO price.

On-chain contract prices always stay close to real values. Just before the opening, the contract traded around $340, only about 3% below the $350 opening price. Meanwhile, the IPO was priced at $185, meaning the perpetual contract's pre-open mark was closer to the company's actual opening price than the official IPO price.

This indicates that on-chain prices maintained a close tether to the company's market cap before listing. If SpaceX, Anthropic, and OpenAI perpetual contracts can also maintain this tether, Hyperliquid will gain credibility and further strengthen its "super-app" narrative.