With its market share dropping from 80% to 20%, is Hyperliquid about to fall from grace?

Author: esprit.hl

Compiled by: AididiaoJP, Foresight News

In recent weeks, there has been growing concern within the industry about Hyperliquid's future. Loss of market share, the rapid rise of competitors, and an increasingly crowded derivatives market all raise a core question: what is happening beneath the surface? Has Hyperliquid already peaked, or is the current market interpretation ignoring deeper structural signals?

This article will analyze it for you layer by layer.

Phase 1: The Period of Full Leadership (Early 2023 – Mid-2025)

During this period, Hyperliquid's key metrics repeatedly reached new highs, and its market share continued to grow, mainly due to the following structural advantages:

• Points-based incentive system: effectively attracts market liquidity.
• The first-mover advantage of launching new contracts: For example, being the first to launch on contracts such as Trump and Bera makes it the platform with the most abundant liquidity for new trading pairs and the first choice for pre-market trading (such as PUMP, WLFI, and XPL). Traders are forced to use Hyperliquid to capture emerging trends, which pushes its competitive advantage to the extreme.
• User experience: It boasts a top-notch user interface and user experience in perpetual contract DEXs.
• Lower transaction fees: More cost-effective compared to centralized exchanges.
• Introducing spot transactions: opening up new use cases.
• Ecosystem building tools: including Builder Codes, HIP-2 proposals, and HyperEVM integration.
• Extremely high stability: Even during major market fluctuations, service remains uninterrupted.

Based on these advantages, Hyperliquid's market share grew for more than a year, reaching a peak of 80% in May 2025.

At that time, the Hyperliquid team was far ahead in terms of innovation and execution, and there was no product in the entire ecosystem that could truly match it.

Phase Two: Period of Sluggish Growth: The "Liquidity AWS" Strategy and Fierce Competition

Since May 2025, Hyperliquid's market share has plummeted, and by early December, its trading volume share had fallen from approximately 80% to nearly 20%.

This relative loss of growth momentum can be attributed primarily to the following factors:

1. Shifting strategic focus from B2C to B2B

Instead of further developing its pure B2C model (such as launching its own mobile app or continuously launching new perpetual contract products), Hyperliquid has shifted to a B2B strategy, aiming to become the "AWS of liquidity" (Amazon Web Services).

At the heart of this strategy is building infrastructure that external developers can utilize, such as Builder Codes for front-end development and HIP-3 for launching new perpetual contract markets. However, this shift means relinquishing some product deployment rights to third parties.

In the short term, this strategy is not optimal for attracting and retaining liquidity. The infrastructure is still in its early stages, market adoption will take time, and external developers currently lack the user reach and trust that the Hyperliquid core team has built up over the years.

2. Competitors seized the opportunity to grab market share.

Unlike Hyperliquid's new strategy, competitors have maintained a fully vertically integrated model, allowing them to launch new products much faster.

Because they control the entire execution process, these platforms retain complete control over product launches while leveraging established user trust for rapid expansion. This makes them far more competitive in the current stage than in the first stage.

This directly translates into market share gains. Now, competitors not only offer the full suite of products on Hyperliquid, but also features that the latter hasn't yet launched, such as the spot market, perpetual stocks, and forex trading already available on Lighter.

3. Lack of incentives and liquidity migration

Hyperliquid hasn't launched any official incentive programs for over a year, unlike its main competitors. For example, Lighter, which recently leads in trading volume market share (around 25%), is still in its pre-token issuance "points incentive season".

In the DeFi world, liquidity is inherently profit-driven. A significant portion of the trading volume flowing from Hyperliquid to Lighter (and other platforms) is likely driven by the pursuit of incentives and potential airdrops. Similar to most perpetual contract DEXs that run on incentive-based systems, Lighter's market share is expected to decline after its token issuance.

Phase Three: The Rise of HIP-3 and Builder Codes

As mentioned above, building a "liquidity AWS" is not the optimal short-term strategy. However, in the long run, it is precisely this strategic positioning that makes Hyperliquid a potential core hub for global finance.

Although competitors have copied most of Hyperliquid's current features, the real source of innovation remains in Hyperliquid.

Ecosystem builders that develop on Hyperliquid can focus on specific areas and formulate more targeted product development strategies on top of a continuously evolving infrastructure.

In contrast, protocols that maintain complete vertical integration (such as Lighter) will face more limitations when optimizing multiple product lines simultaneously.

While HIP-3 is still in its early stages, its long-term impact is already beginning to emerge. Major players like @tradexyz have launched perpetual stocks, and @hyenatrade recently deployed a terminal for trading USDe. More experimental markets are emerging, such as @ventuals, which provides pre-IPO asset exposure, and @trovemarkets, which focuses on niche speculative markets like Pokémon or CS:GO assets.

It is projected that by 2026, the trading volume of the HIP-3 market will account for a significant share of the total trading volume of Hyperliquid.

The key to Hyperliquid's eventual resurgence lies in the synergy between HIP-3 and Builder Codes.

Any frontend that integrates with Hyperliquid can immediately access all HIP-3 marketplaces, thus offering unique products to its users. Therefore, builders have a strong incentive to create new marketplaces through HIP-3, as these marketplaces can easily access any compatible frontend (such as Phantom, MetaMask, etc.), thereby reaching entirely new sources of liquidity—a perfect growth flywheel.

Builder Codes’ continued growth makes me increasingly optimistic about its potential for revenue generation and user growth.

Currently, Builder Codes' primary users are still crypto-native applications such as Phantom, MetaMask, and BasedApp. However, I anticipate the emergence of a new type of "super app" built on Hyperliquid, designed to attract a completely new user base that is not crypto-native.

This could very well be the path Hyperliquid takes to enter its next phase of scaling.