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Hyperliquid Trading Volume Soars, Why Is Profit Shrinking?

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Hyperliquid's open interest and trading volume have continued to hit new highs. However, due to the HIP-3 fee-sharing mechanism, the rise of third-party markets, and a lackluster ecosystem, the platform's retained earnings have been declining steadily. The HYPE buyback pressure, valuation support, and regulatory scrutiny are all under pressure simultaneously.

Original Title: Hyperliquid's RWA Perps Boom is Eating into the Revenue that Backs HYPE
Original Author: Shaurya Malwa, CoinDesk
Translated by: Chopper, Foresight News

The contract position on the Hyperliquid platform has hit a record high, but the platform's retained transaction fee revenue is dwindling.

On July 13, the total size of leveraged positions held by traders on the platform, known as open interest, surged above $11 billion, marking a new all-time high for Hyperliquid in 2026. Over the past 30 days, the total trading volume of Hyperliquid's perpetual contracts approached $178 billion. Currently, accounting for all centralized exchanges, Hyperliquid now holds around 9% of the global perpetual contract open interest, up from under 7% at the end of May.

However, the platform's revenue has taken a reverse trend. Data from DeFiLlama shows that Hyperliquid's protocol revenue peaked at around $357 million in Q3 2025 and has since declined each quarter, dropping to $295 million, $217 million, and approximately $202 million in Q2 2026. Amidst a rising number of transactions, platform revenue has dropped by 43% from its peak.

Hyperliquid's Platform Revenue Declines for Four Consecutive Quarters

Hyperliquid Improvement Proposal HIP-3 can explain why the platform is unable to retain all the revenue generated by its own business. Since October 2025, anyone can deploy their own perpetual contract market on Hyperliquid's order book by staking 500,000 HYPE tokens (equivalent to approximately $28 million at the current price) and can take away up to half of the trading fees.

At the beginning of 2026, these externally deployed markets represented only 2% of Hyperliquid's perpetual contract trading volume, a figure that has now grown to nearly 50%.

The revenue data clearly reflects the impact of revenue-sharing. The portion of transaction fees directly returned to developers, liquidity providers, and the platform's liquidity treasury stood at only 6% of total revenue in Q2 2025; one year later, this proportion had increased to 18%.

In the second quarter, developer fee revenue generated by front-end routing solutions like Phantom amounted to approximately $16 million, all of which was then allocated as operating costs and flowed out seamlessly as part of the off-chain settlement.

Transaction Fee Flow

A continuous influx of traders has been observed, driven by the introduction of new asset classes on these third-party markets: Real World Assets (RWA) perpetual contracts. Contracts tied to real-world assets such as crude oil, gold, Nvidia, Tesla, the Nasdaq 100, and even pre-IPO entities like SpaceX saw the open interest hit a new record high of $3.6 billion this month, surpassing Bitcoin and becoming the largest trading market on the platform.

From July 13 to July 19, the trading volume of tokenized stocks and commodity contracts reached $25 billion, accounting for 52% of the total weekly volume, surpassing cryptocurrency perpetual contracts for the first time. These contracts settle in stablecoins, have no expiration date, and can be traded even during weekends when the NYSE is closed. If one wishes to trade a leverage contract on Nvidia at 2 a.m. on a Sunday, there are barely any other similar options available in the market.

However, this growth spurt is heavily reliant on a single entity. Trade.xyz holds over 90% of the open interest under the HIP-3 mechanism. This means that the remarkable achievements of Hyperliquid are highly dependent on the deployment party's oracle selection, margin parameter configuration, and risk management capabilities.

On the previous Monday, the hidden risks of this model were exposed: a significant trade occurred on a liquidity-thin exchange in the Korean pre-market, causing a direct 19% drop in Trade.xyz's SK Hynix contract, triggering a large number of liquidations. The institution later agreed to compensate the affected users.

Hyperliquid plans to inject approximately 97% of the trading fees into an aid fund, which actively conducts buybacks from the open market to burn the HYPE tokens, with around 44.5 million HYPE tokens already burned from the total supply. The buyback amount is directly linked to platform earnings, and as earnings decline, the size of the buyback also shrinks. In the third quarter of 2025, the fund repurchased nearly $290 million worth of HYPE tokens; in the second quarter of 2026, the buyback amount dropped to around $149 million, nearly halved.

According to CoinDesk data, the price of HYPE was close to $55 last Friday, marking a 5% weekly decline. Compared to its all-time high around $77 on June 16, the token has dropped by approximately 28%. With an estimated annualized revenue of around $785 million, the token's circulating market cap-to-earnings ratio is about 16x, and the fully diluted PE ratio is around 70x.

Over the past month, institutional holders such as Multicoin Capital and Bitwise have transferred large amounts of HYPE tokens to the exchange.

The Hyperliquid ecosystem is actually quite thin. Among the 48 Hyperliquid ecosystem tokens tracked by CoinGecko, almost all of the market capitalization is concentrated in HYPE. The second and third rankings are Ethena's USDe (about $4.5 billion) and USDT0 (about $4 billion), both external stablecoins with cross-chain integration. The token with the largest native issuance on the platform is PURR, with a market cap of only $53.1 million, which is less than 0.5% of the HYPE market cap. The market valuation of HYPE mainly comes from the business model of the Hyperliquid exchange platform itself, rather than a rich native application ecosystem.

Hyperliquid ecosystem value is concentrated in HYPE

The token supply is under pressure from regulatory bodies. On August 6, nearly 10 million HYPE tokens were unlocked for core contributors, valued at approximately $550 million at the current price; subsequent unlocks will continue monthly until 2027, while the total circulating supply of HYPE is only 222 million tokens.

As of the week ending July 17, the HYPE spot ETF saw a net outflow of funds for the first time since its inception, with an outflow of approximately $7 million, ending nine consecutive weeks of inflows. The Monetary Authority of Singapore (MAS) included the platform on its investor alert list at the end of June, and the UK had previously issued a risk warning; executives from CME and ICE have also urged the U.S. CFTC to conduct a review of its commodity perpetual contract business.

Competition has also emerged from unexpected places. Just one month after brokerage firm Robinhood launched Robinhood Chain, the decentralized exchange in the meme coin race has already surpassed $600 million in daily settlement volume, and by some measures, its daily speculative trading activity has exceeded that of Hyperliquid.

Of course, all of the above does not mean that this platform is already heading for failure. ARK Research data shows that as of July 31, Hyperliquid and Pump.fun together accounted for 67% of total cryptocurrency app revenue. Grayscale has also likened Hyperliquid to Amazon AWS: external developers build products on the platform, and the platform takes a cut from all transactions.

However, this analogy actually highlights the current issue. In the first four weeks of the third quarter of 2026, Hyperliquid's total revenue was about $45 million. If this pace continues, the total revenue for this quarter will be close to $150 million, achieving a revenue decline for the fourth consecutive quarter. The buying pressure supporting the HYPE token will also weaken further as a result.