Once dominating the decentralized perpetual contract market with an 80% share, Hyperliquid faced severe challenges in the second half of 2025. Its market share plummeted to around 20% within a few months, raising widespread concern and speculation about its future direction.

Is this the end of a dynasty, or merely a painful adjustment in a strategic transformation?

1. Extreme Dominance (Early 2023 - Mid 2025)

For two and a half years, Hyperliquid was the undisputed leader in the market. Its market share consistently grew, peaking at about 80% in May 2025. This dominance was built on multiple structural advantages:

● Incentive Mechanisms and First-Mover Advantage: Early incentive programs based on points attracted significant liquidity. More importantly, the team leveraged keen insights into market trends, repeatedly seizing opportunities in the launch of perpetual contracts for new assets (such as TRUMP and BERA), making it the preferred platform for "pre-listing trading." Traders flocked to Hyperliquid in pursuit of trends.

● Outstanding Product Experience: The platform offered the best UI/UX experience among decentralized perpetual contract exchanges at the time, with fees lower than centralized exchanges, and maintained zero downtime stability during market volatility, earning user trust.

● Ecosystem Expansion and Technological Innovation: By launching spot trading, releasing Builder Codes, HIP-2, and integrating HyperEVM, Hyperliquid continuously unlocked new scenarios and expanded its ecosystem boundaries. Its proprietary L1 chain, based on the HyperBFT consensus mechanism, provided sub-second execution speeds, significantly outpacing competitors technologically.

At this time, Hyperliquid was comprehensively ahead in innovation and execution speed, with almost no direct competitors. Its token HYPE established a strong value accumulation model by using 97% of trading fees for buybacks, driving significant price increases.

2. Growing Pains (May 2025 - End of 2025)

After peaking in May 2025, Hyperliquid's market share began a rapid decline, dropping to around 20% by early December. This "loss of momentum" was the result of both internal and external factors.

2.1 Shift in Core Strategy: From B2C to B2B

Hyperliquid made a crucial strategic decision: it would no longer focus on pure consumer-facing (B2C) competition, such as developing its own mobile app, but would instead pivot to enterprise services (B2B), aiming to become the "AWS of liquidity" (Amazon Web Services). The core of this strategy is to build an open infrastructure:

● Builder Codes: Allowing any external team (such as wallets and trading terminals) to seamlessly integrate their front-end interfaces with Hyperliquid's back-end order book and liquidity, sharing the fees generated from trades.

● HIP-3 Proposal: Aimed at allowing anyone to create new perpetual contract markets on Hyperliquid without permission by staking HYPE tokens.

However, this long-term strategy brought short-term growing pains. It partially handed over the initiative for product development and market promotion to third parties, while external developers initially struggled to match the distribution capabilities and user trust of Hyperliquid's original team.

2.2 Competitors Rising to the Occasion

While Hyperliquid focused on infrastructure, competitors employing a fully vertically integrated model acted more swiftly. They maintained complete control from product to marketing and used aggressive incentive measures to capture market share.

● Aster: Gained significant attention due to its close ties with Binance and its co-founder Zhao Changpeng (CZ). It saw a massive surge in trading volume through large-scale airdrop incentives, at times even surpassing Hyperliquid, with market share quickly climbing from single digits to 19%.

● Lighter: Built on the Ethereum Layer 2 network, it emphasized zero-fee trading and extremely high transaction speeds. Before its token launch, its incentive activities attracted a large amount of "hired liquidity" trading to obtain airdrops, pushing its market share to about 25%.

2.3 The Challenge of "Hired Liquidity"

Hyperliquid had not launched an official incentive program for over a year, while its competitors were in the midst of "points seasons" or airdrop activities.

In the DeFi world, the characteristic of liquidity chasing profits is amplified. Many traders migrated from Hyperliquid to platforms like Aster and Lighter, primarily driven by the pursuit of short-term incentives and airdrop expectations.

Analysis indicates that this incentive-driven trading volume is "hollow," and once the token generation event (TGE) is completed, market share is likely to decline.

3. Ecosystem Counterattack and Future Path

Despite the short-term setback in market share, Hyperliquid's transformation strategy is beginning to show long-term potential. Its goal has evolved from being merely a trading platform to a complete decentralized financial infrastructure stack.

3.1 HIP-3: Opening Up Permissionless Market Innovation

Launched in October 2025, HIP-3 is a key step in Hyperliquid's ecosystem evolution. Any participant staking 500,000 HYPE can create custom perpetual markets. This brings unprecedented asset diversity:

● Traditional Financial Assets: Such as perpetual stocks launched by @tradexyz.

● Yield-bearing Asset Markets: Trading markets built around collateral like sUSDe for Ethena.

● Futuristic and Alternative Assets: Including synthetic exposure to pre-IPO companies like SpaceX provided by @ventuals, and niche speculative markets for Pokémon and CS:GO skins created by @trovemarkets.

By 2026, the trading volume of HIP-3 markets is expected to account for a significant share of Hyperliquid's total trading volume. This transforms it from a limited trading platform into an infinite derivatives market infrastructure layer.

3.2 Distribution Network Built by Builder Codes

Builder Codes and HIP-3 have created a powerful synergy. This means that any application integrating Hyperliquid's front end (such as mainstream wallets like Phantom, MetaMask, Rabby, etc.) allows its users to directly access all innovative markets created by HIP-3.

This forms a virtuous cycle of growth: developers are motivated to create unique markets through HIP-3 because these markets can reach a vast user base via the extensive Builder Codes network; while applications integrated with Builder Codes can offer their users a far richer product experience than other vertical exchanges. Currently, Builder Codes have routed over $158 billion in trading volume for partners, generating nearly $50 million.

3.3 Building a Self-Circulating Financial Ecosystem

Hyperliquid's ambitions extend beyond trading. It is constructing a deeper and more resilient ecosystem through a combination of “Layer 1 + Stablecoin + Open Protocols.”

● HyperEVM: As a smart contract chain running parallel to the high-performance trading chain HyperCore, it has attracted over 100 protocol deployments, with a total locked value (TVL) exceeding $2 billion, supporting a thriving DeFi ecosystem.

● Native Stablecoin USDH: To reclaim approximately $100 million in annual revenue lost to competitors due to the use of USDC, Hyperliquid selected Native Markets, led by seasoned community members, to issue its native stablecoin USDH through a bidding process. This not only creates a new profit model but also enhances the financial closed loop of its ecosystem.

4. Summary and Outlook

The sharp decline in Hyperliquid's market share is essentially the result of its proactive strategic transformation combined with an external intensely competitive environment. The table below summarizes the evolution trajectory of its three phases:

In the short term, Hyperliquid still faces immense pressure. Competitors' airdrop activities may continue to siphon off trading volume, while the maturation of the HIP-3 and Builder Codes ecosystem will take time.

However, in the long term, Hyperliquid has chosen a more challenging but potentially more sustainable path. It is no longer satisfied with being just the best decentralized exchange; it is committed to becoming the core protocol layer that supports the future of on-chain finance. The true test will be whether, when the airdrop music stops for the entire market, traders will stay on a platform with limited functionality but rich incentives, or migrate to the Hyperliquid ecosystem, which offers diverse products, deep integration, and a smooth experience.

Hyperliquid's "last stand" is not just about the rise and fall of a project; it may reshape the competitive logic and landscape of decentralized derivatives and the entire DeFi world.

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