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Hyperliquid's Growing Influence in Crypto Trading: Can It Maintain Long-Term Investment Appeal?

Hyperliquid's Growing Influence in Crypto Trading: Can It Maintain Long-Term Investment Appeal?

Bitget-RWA2025/11/12 04:38
By:Bitget-RWA

- Hyperliquid dominates 80% of 2025 perpetual contract market via on-chain governance and user-driven liquidity innovations. - Centralized governance (HIP-3 protocol, USDH stablecoin launch) balances permissionless market creation with validator dominance risks. - HLP liquidity model generates $40M during crashes but faces regulatory scrutiny and token economics challenges from 2025 HYPE unlock. - TVL growth to $5B and 518K active addresses highlight adoption, yet governance centralization and institutiona

Hyperliquid has established itself as a powerhouse in the decentralized trading sector, commanding more than 80% of the perpetual contract exchange market share in 2025, based on data from . This swift rise is fueled by a combination of innovative on-chain governance and liquidity solutions shaped by its user base. Yet, as the platform contends with issues such as centralization, tokenomics, and regulatory oversight, investors must carefully consider its strengths alongside its inherent risks. This report delves into Hyperliquid's governance framework, liquidity approaches, and prospects for long-term viability, focusing on its progress throughout 2025.

Centralized Governance and Open Innovation

Hyperliquid’s on-chain governance structure presents both opportunities and challenges. The platform operates with 24 validators, and the

Foundation holds control over two-thirds of all staked HYPE tokens, as highlighted in a , leading to a concentration of authority. Nevertheless, recent enhancements such as HIP-3 have enabled users to create markets without permission. This protocol lets participants introduce new perpetual markets by staking 500,000 HYPE tokens, with the risk of slashing if misuse is detected, according to Bitget. While this aligns with the broader movement in DeFi, it also brings up concerns about validator influence. For example, the JELLY incident—where validators decided to liquidate a high-risk position and the Foundation compensated affected users from its reserves—demonstrated both the responsiveness and the centralized nature of governance, as per Coinotag’s findings.

A major milestone in 2025 was the USDH stablecoin introduction, which was approved through a governance vote that favored Native Markets over alternatives like Paxos and Frax, as reported by LiveBitcoinNews. Although this step lessens dependence on

, some critics have pointed out a lack of transparency in the process, with claims that Native Markets may have had early advantages, according to LiveBitcoinNews. Meanwhile, the upcoming $10.8 billion HYPE token unlock scheduled for November 2025 has prompted a proposal to cut the token supply by 45% via reserve burning, as noted by PanewsLab. This move is intended to support HYPE’s value, but could also trigger short-term price swings, as shown by recent bearish RSI signals and falling weekly fees, according to Bitget’s Hyperion DeFi analysis.

Hyperliquid's Growing Influence in Crypto Trading: Can It Maintain Long-Term Investment Appeal? image 0

User-Powered Liquidity: Strengths and Weaknesses

Hyperliquid’s liquidity framework is anchored by the Hyperliquidity Provider (HLP) vault, which aggregates user deposits to ensure constant counterparties. During a $10 billion market downturn, the HLP generated $40 million in returns, as cited by Coinotag. Additionally, the Borrow Lending Protocol (BLP) testnet allows for on-chain borrowing of assets like USDC and PURR to help manage leveraged trading risk, as reported by Bitget. These features position Hyperliquid as a bridge between centralized and decentralized finance, offering both speed and liquidity while maintaining user control.

However, the system’s dependence on HYPE token staking for launching new markets introduces certain vulnerabilities. For instance, the AERO/USDC perpetual contract, which debuted with 3x leverage, highlights Hyperliquid’s appeal to active traders but also its exposure to asset volatility, as observed by Lookonchain. Regulatory pressures add another layer of complexity, especially as rivals like BlockchainFX obtain institutional licenses, according to Cryptopolitan. Despite regulatory uncertainty, user engagement remains strong: total value locked (TVL) soared from $564 million at the end of 2024 to $5 billion by the close of 2025, according to Oak Research. Active wallet addresses also increased by 78%, reaching 518,000, per Oak Research’s data.

Sustainability: Navigating Growth and Control

The future success of Hyperliquid depends on its ability to balance centralized oversight with decentralized participation. The introduction of the HIP-3 protocol and HyperEVM (an Ethereum-compatible execution environment), as detailed in CoinMarketCap’s recent update, improves both composability and scalability, though validator concentration remains a concern. Growing institutional interest—such as 21Shares’ application for a HYPE ETF, as reported by Bitget—reflects confidence in the platform’s potential. However, price instability and leadership transitions (for example, CEO Michael Rowe stepping down) could impact investor confidence, as noted in Bitget’s coverage.

Clearer regulatory guidelines are also essential. The Jelly incident, which involved a $12 million loss from the HLP that was offset by an oracle intervention, as reported by Oak Research, highlighted the importance of strong security protocols. Hyperliquid’s buyback initiative, which uses 97% of protocol fees as per CoinMarketCap, creates deflationary pressure, but broader economic challenges and competition from centralized exchanges could threaten its market position.

Conclusion: High Risk, High Potential

Hyperliquid’s advancements in governance and liquidity have made it a frontrunner in decentralized trading. The platform’s rapid TVL growth, expanding user base, and strategic alliances (such as with Felix), as reported by Bitget, point to solid fundamentals. Still, its centralized decision-making, upcoming token unlock, and regulatory ambiguity present notable risks. For investors, Hyperliquid offers a high-risk, potentially high-reward scenario: its open market creation and HLP system could fuel ongoing expansion, but underlying structural issues warrant a cautious approach.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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