What Is Hyperliquid and How Does It Work?

Hyperliquid is gaining attention in the DeFi space with its new perpetual exchange, built on the HyperEVM blockchain. It allows users to trade perpetual futures contracts without owning the underlying assets, making it an attractive option for speculators.

However, despite its growth, Hyperliquid’s native token, HYPE, has recently dropped in value. This article looks at what Hyperliquid is, its HYPE coin, and the factors behind the recent price changes.

What Is Hyperliquid?

Hyperliquid is a decentralized perpetual exchange built on HyperEVM, its custom layer-1 blockchain designed specifically for fast and low-latency trading. Unlike traditional centralized exchanges, Hyperliquid offers users the ability to trade perpetual futures contracts on cryptocurrencies without having to own the underlying assets. This model is perfect for speculators who want to bet on price movements without the need to hold the assets physically.

The platform’s standout feature is its on-chain order book, which allows for transparent, real-time trading. This system addresses many common issues seen in decentralized exchanges (DEXs), such as high latency and inefficient order matching, providing users with a smoother, more reliable trading experience. Hyperliquid’s integration of these technologies brings it closer to bridging the gap between centralized and decentralized finance, offering the best of both worlds to its users.

HYPE Token Explained

The HYPE token is the native cryptocurrency of the Hyperliquid platform and plays a crucial role in its operations. With a total supply of 1 billion tokens, HYPE is integral to governance, staking, and transaction activities on the HyperEVM blockchain. The token is designed to encourage community participation, with 70% of its supply allocated to users, meaning that the community holds a significant influence over the direction of the platform.

HYPE token holders have the ability to vote on platform upgrades and changes, making it a key aspect of Hyperliquid's decentralized governance model. Additionally, the token can be used to stake and earn rewards, incentivizing users to help secure the network. Although most transactions on Hyperliquid are gas-free, HYPE is required for more advanced operations, such as interacting with smart contracts or powering decentralized applications (dApps).

The tokenomics of HYPE have contributed to its early success, with a surge in demand following its airdrop. As of now, HYPE has a total market capitalization of several billion dollars, and its utility continues to expand within the growing Hyperliquid ecosystem.

Hyperliquid Recent Price Movements

The HYPE token, which saw impressive gains in February, is now facing significant price drops. It’s currently down 6.22% in one day and 4.59% over the past week, trading at $13.58. This is a sharp decline from its all-time high of $35.02 in December 2024, when it surged over 900% in just a month.

This drop follows the JellyJelly (JELLY) token controversy on March 27, when Hyperliquid delisted JELLY after a price manipulation incident. This decision led to a loss of trust, with many traders pulling their assets out of Hyperliquid, causing the price of HYPE to fall further.

That decision left the crypto community divided. Some argue the trader's actions were part of the inherent risks in DeFi, while others believe the platform acted to protect liquidity providers. This incident has raised concerns about the transparency and decentralization of the platform, with many questioning whether such decisions could jeopardize the trust of users.

The controversy has had a significant impact on the exchange and the HYPE token, which is now down 61% from its all-time high of $35.02. Industry figures like Gracy Chen have criticized Hyperliquid’s response, drawing comparisons to FTX’s collapse and calling it “immature” and “unprofessional.” As a result, many traders are turning to alternative DEXs with greater transparency, leaving Hyperliquid's future uncertain as it struggles to regain user trust.

Conclusion

That being said, Hyperliquid is still young, and its future largely depends on how well it addresses concerns about transparency and the potential for centralization. The community’s voice will be more crucial than ever in shaping the platform's direction.

If Hyperliquid can navigate these challenges and continue to deliver on its promise of high-speed, transparent trading, it could continue to capture the attention of traders who seek the best of decentralized finance.