This article was originally published on March 4th and updated on March 9th

At 1:12 AM EST on February 28, during the exchange's off-hours, the trading volume of the prediction market contract on Polymarket regarding the US striking Iran saw a significant increase.

Source: @yenwod_

At 1:13 AM, the first open-source intelligence tweet about the airstrike appeared on Twitter.

One minute later, there was unusual activity in the price and trading volume of the crude oil perpetual contract on Trade.xyz by Hyperliquid.

With the headline news brewing, the crude oil perpetual contract on Hyperliquid saw a 5% surge, reaching a $50 million open interest. The HYPE price rose by 13%, leading the top 25 tokens by market cap.

Over the just-passed weekend, the news of the blockage in the Strait of Hormuz added fuel to the fire for oil trading. TradeXYZ had already pushed the CL contract price up 110% to the COMEX closing price over the weekend, triggering the platform's 'limit up' mechanism.

The total open interest of crude oil contracts on the HIP-3 exchange also steadily climbed over the weekend, reaching a peak of nearly $200 million.

24/7 Trading

Out of the ten high-volatility macroeconomic events in the past year, eight erupted over weekends. Hyperliquid's round-the-clock price discovery mechanism is attracting attention from the traditional financial markets.

In two recent reports, Bloomberg highlighted Hyperliquid, noting that as the crypto market becomes more intertwined with traditional finance, Wall Street is beginning to closely monitor platforms like Hyperliquid. Over the weekends when traditional markets are closed, on-chain derivatives provide continuous risk pricing capabilities. Bloomberg quoted market participants stating that this round-the-clock pricing mechanism is a structural upgrade to enhance market efficiency. The weekend's market movements validate a trend that all asset classes' round-the-clock on-chain trading is an inevitable direction for financial market development.

The data also confirms the effectiveness of Hyperliquid's weekend period in facilitating market behavior "price discovery."

Based on tracking thirty-five assets including stocks, commodities, and index ETFs, the weekend trend of Hyperliquid accurately predicted the direction of Monday's traditional market opening gap with a success rate as high as 90%. The only 3 errors were due to minor opening fluctuations, with CME's price change being less than 0.05%. The clearest pricing signal occurred at 20:00 UTC, three hours before the CME opening.

Decoupling

As HIP-3, which supports traditional market trading, continues to grow, HYPE's price performance has already begun to decouple from the default benchmark of the crypto market, Bitcoin. When news of the recent attack broke, the price of Bitcoin plummeted and entered a period of volatility. In contrast, HYPE, which caters to trading demand for precious metals, stocks, and more, showed an independent trend.

In late January, when silver broke $100 and gold broke $5500, the trading volume of silver single assets on the HIP-3 exchange tradexyz alone reached $1.2 billion, driving HYPE to rise by 55% in three days, while Bitcoin only rose by 3% during the same period.

Contract trading volume of gold, silver, and copper on Trade.xyz surged since January

The tokenomics explain the reason for HYPE's strength. As defined by Hyperliquid's HIP-3 protocol, 50% of all fee revenue generated by HIP-3 exchanges flows into the Hyperliquid official aid fund and is used to buy back HYPE. Macro volatility boosts trading volume, the increased volume boosts the buyback size, bringing strong buying pressure to the HYPE token.

Fee revenue generated by HIP-3 exchanges

Over the past thirty days, Hyperliquid has generated $53.11 million in revenue, ranking third on DeFiLlama's Protocol Revenue Leaderboard, behind only stablecoin issuers Tether and Circle.

HYPE holders are not only betting on Hyperliquid's growth as an offshore Perp DEX but also on the geopolitical uncertainty.

Hyperliquid is just the clearest expression of this narrative to date, and the market is finally starting to reflect that.

Gap

Nevertheless, on-chain derivatives still have a ways to go to reach the standards of traditional institutions.

Hyperliquid's current edge lies in small to medium-sized retail orders. According to Blockworks Research, during normal trading hours, the bid-ask spread of its silver contract is comparable to the COMEX mini contract. However, there is a significant gap in depth. The order book depth on COMEX within plus/minus 5 basis points is $13 million, while Hyperliquid is only around $230k.

COMEX vs. Hyperliquid Order Book Depth Comparison
Source: Blockworks Research

In extremely sharp market downturns, the tail risk of on-chain liquidity degradation is greater. 1% of Hyperliquid's silver trades experience slippage of over 50 basis points, while COMEX still has better execution costs in such scenarios.

COMEX vs. Hyperliquid Execution Slippage Comparison
Source: Blockworks Research

Currently, Hyperliquid's liquidity and funding rate model cannot meet the needs of large funds. The annualized funding rate for the crude oil trading pair on Kinetiq reached an exaggerated 5842% yesterday, which is a huge cost for long traders. However, looking at it from another angle, it also creates excellent profit opportunities for basis trading (funding rate arbitrage).

Hyperliquid Annualized Funding Rate for Three Crude Oil Perpetual Contracts

Furthermore, to compete at an institutional level, on-chain platforms need to address the KYC issue and even establish a technical and partnership framework that is compatible with traditional clearing institutions. Many industry insiders still believe that if the Chicago Mercantile Exchange (CME) were to introduce 24/7 trading, it would have a natural hedging advantage and trust foundation.

However, regardless, the traditional financial market's reliance on a risk control model based on physical shutdown times has indeed revealed its limitations. The ability to continuously price risk without waiting for Monday's opening is a core value proposition of offshore exchanges like Hyperliquid.

The transfer of market pricing power to the blockchain will be a long-term process. One must have dreams; what if they come true?

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