Is HyperEVM holding back Hyperliquid?

Author: Sleeping Wildly in the Rain

When Hyperliquid was being FUDed the most, big players like @smartestmoney and @CL207 were entering the market to buy.

And that guy who publicly shorted is being liquidated.

Hyperliquidated.

If you are selling/shorting $HYPE at a high price due to team unstaking or unlocking, I think it's fine. But one thing to keep in mind is that the short-term decline of $HYPE does not mean that the fundamentals of Hyperliquid have worsened. On the contrary, with the launch and expansion of Hyperliquid Hip-3, I believe the fundamentals of Hyperliquid are developing in a better direction. This is something that anyone with discernment can see.

Also, I recently read an article (I won't provide the link to which one specifically), and I'd like to briefly share my thoughts.

The core point of the article is that “The misalignment between the HyperEVM ecosystem and $HYPE has led to the market's valuation of Hyperliquid still being at the level of applications like Aave and Uniswap, rather than at the infrastructure level of Layer1/Layer2.”

I think it's fine to say that the HyperEVM ecosystem and $HYPE are not yet aligned. The only protocol that truly holds value in the HyperEVM ecosystem right now should be the LSD protocol of $HYPE .

However, one cognitive bias that needs to be overcome is that the team launched HyperEVM not to elevate the valuation level of $HYPE , but rather hopes that the HyperEVM ecosystem projects can generate a synergistic effect with Hyperliquid's core PerpDEX product.

We cannot apply the traditional fat protocol thin application theory to Hyperliquid—many projects launch Layer 1 to better sell their tokens, but we do not see such signs in the behavior of the Hyperliquid team. Moreover, most Layer 1 project teams strive to develop ecosystems in order to create a liquidity pool for their main chain tokens, that is, to obtain sufficient exit liquidity.

Moreover, it has been proven that using higher value to determine the valuation of infrastructure itself has always been a misjudgment of value in the crypto world.

Fees Don’t Lie.

Layer 1 accounts for 90% of the Total Market Cap, but their fees only account for 12% of total fees. The valuation of cryptocurrencies is still based on the “fat protocol, thin application” theory. However, the data shows the opposite.

Hyperliquid may change this situation. The application is the most direct value capture layer, and investing long-term, substantial fee income into the buyback of its own token is the value support of $HYPE . In the long run, the value of $HYPE is not driven by the narrative brought by HyperEVM and Hip-3, but is determined by its fees.

Hyperliquid does not require the HyperEVM ecosystem as the exit liquidity for $HYPE ; in essence, its product fees are the exit liquidity for $HYPE . Ethereum is the same; it has a burn mechanism, but it cannot capture enough fees, while Layer2 leverages Ethereum's security but fails to reinvest the value it creates back into $ETH . Therefore, many people view Lighter as a turning point for Ethereum, hoping that Lighter as a Layer2 can generate value increments for Ethereum.

Let's shift the topic back to HyperEVM. The developers on HyperEVM initially followed the same logic as in other chains, building a complete DeFi ecosystem and meme trading for HyperEVM, such as creating LSD, lending, and DEX products. However, these products, except for LSD, did not provide incremental value to Hyperliquid's core product, PerpDEX. This also led to HyperEVM being unable to align with $HYPE .

However, as I mentioned earlier, although there hasn't yet been a phenomenal DeFi product that can resonate with Hyperliquid's core offerings, at least for now, Hyperliquid doesn't need an ecosystem as a reservoir for $HYPE . Thus, ecosystem projects and developers still have ample time to develop. Moreover, we have already seen the emergence and development of such products (like the upcoming TGE of @harmonixfi @hyperbeat), but acquiring users and trust still requires some time.

Therefore, I think this is a completely unnecessary issue to worry about.

Finally, returning to the first principles, all the work and product updates of the Hyperliquid team serve its core product. If we only view Hyperliquid's valuation cap through the lens of traditional cryptocurrency thinking, it would be akin to blind men touching an elephant.

That’s all, hyperliquid.