How Hyperliquid’s insanely lucrative airdrop launch changed the game

Hyperliquid has been lauded for delivering the best and most lucrative airdrop launch in crypto history back in November, by excluding VCs and rigorously encouraging community involvement.

Still, experts caution that other projects trying to copy the decentralized exchange’s (DEX’s) launch strategy are unlikely to realize the same success.

Jae Sik Choi, an analyst at Greythorn Asset Management told Cointelegraph the decision to exclude venture capitalists and hone in on community involvement was a boon for the price action of HYPE post-airdrop and helped create the cult following the perpetuals DEX now enjoys on social media. 

“One of the main things they got straight was creating short-term artificial demand by not having VCs — this forces them [VCs] to buy the moment the token comes to market along with everyone else,” Choi said. 

“They literally came back to what crypto was originally, which is fair launches. If the product is decent and the launch is fair, it’s almost guaranteed to pump no matter what.”

Choi added that one of the lesser-known contributors to HYPE’s price-action was the HYPE Assistance Fund, a Hyperliquid entity dedicated to buying back HYPE on the open market. 

“They baked it into the tokenomics so that the Hyper Assistance Fund keeps on buying every day through the revenue the protocol earns. And right now, in the Trump era, I don’t think that will be ever an issue with regulators,” he said. 

“This is consistent demand that’s created from real revenue, which is great. Technically this is still artificial demand, but funnily enough, it then creates organic demand from the market by creating a FOMO flywheel.”

Still, he said token buybacks are not a golden ticket to up-only price action forever.

“It can only last for so long. It’s like an Ouroboros effect.”

Hyperliquid chose to be “egalitarian”

Synthetix founder Kain Warwick told Cointelegraph that Hyperliquid succeeded largely because of its egalitarian focus on rewarding early and loyal users regardless of their “size,” as well as getting lucky with timing.

“Hyperliquid built attention and awareness in the bear market. It would be so much harder for a new project to come out and do that now because the noise floor is so much higher,” said Warwick. 

Warwick recently made a similar move while raising funds for his new platform Infinex, opting for a “patronage” model that raised $68 million by selling Patron NFTs direct to market at the same price to VCs as retail.

The strategy aims to build up a community that will take an ongoing interest in the project rather than abandon it after VCs dump huge allocations of tokens from the Fully Diluted Value (FDV) supply.

“The big takeaway is not doing these low-float, high-FDV, VC-led raises. By rewarding the early and ongoing users it’s an opportunity to get more actual people in.”

On Nov. 29, Hyperliquid launched its native HYPE token, airdropping 27.5% of the total supply to just over 94,000 users. 

On launch, HYPE was worth a total of $1 billion. However, the total value of this airdrop has since burgeoned to over $7.5 billion at the time of publication, making HYPE the single largest airdrop in the history of crypto.

Immediately in the wake of the airdrop on Nov. 30, Warwick declared that Hyperliquid could very well “break the curse” of perp DEXs fading into obscurity after they drop their token, typically because users lack incentives to continue using the product at the same scale after they’ve finished farming it. 

HYPE has outperformed other airdropped DEX tokens, including the Ethereum DEX Uniswap (UNI), perp DEX dYdX (dYdX), Solana exchange aggregator Jupiter (JUP) and perps platform Aevo (Aevo).

Choi contrasted HYPE with the launch dynamics of Celestia, a data availability protocol that has been marred by allegations of insider OTC deals and for rewarding early investors by launching at an extremely high fully-diluted valuation.

“In hindsight, we know why TIA pumped is because, on the side, the Celestia Foundation was selling TIA via OTC deals.”

“The moment TGE [token generation event] happened it scaled all the way up to a 70% discount on the market for early investors. By that point, the price was already at $10. We all knew what was going to happen next; they were going to short the other end to capture the profits.”

“With Hyperliquid they can’t do that. They need to buy the inventory first, then short when it’s actually pumped,” Choi said. 

It’ll be ‘really hard’ to copy Hyperliquid

While many pundits — especially those who received airdrops — have praised Hyperliquid for its generous token distribution, Warwick said other protocols should be wary of giving out large volumes of their native tokens to users. 

“This is probably not the lesson to learn for everyone, right? We’ve seen plenty of other people try and do 30-plus percent airdrops and it doesn’t work.”

“If you don’t have giga-attention on your product, then it’s going to be really hard for that to be sustainable and you just create a downward price spiral,” Warwick added.

In a Jan. 6 report, asset manager VanEck shared that Hyperliquid has been consistently expanding its dominance over the perp DEX ecosystem, from a 10% market share to a 70% market share within a year.

Aside from launch dynamics and tokenomics, Choi said one of the biggest reasons Hyperliquid performed well was the fact that it offered a good product that felt easy to use, had deep liquidity and high throughput compared to competitors such as GMX. 

From a product perspective, Hyperliquid focused heavily on throughput and quickly began to outrank competitor decentralized perp exchanges including GMX, Vertex Protocol and dYdX.

According to VanEck, Hyperliquid can process 100,000 orders per second, whereas most competitors like GMX and Vertex process “several magnitudes less.”

Additionally, VanEck noted that Hyperliquid offers a cheaper product with a lower fee structure than its rivals. 

“It felt like I was trading on Binance but with no KYC or AML. There was also the ability to take higher risk trades with better functionality than other Perp DEXs,” said Choi. 

Related: Hyperliquid rolls out native staking on mainnet

“One of the big reasons why Hyperliquid works really well is because it’s an order book-based exchange. So that slippage issue and toxic flow you get on other DEXs isn’t really relevant in terms of arbitrage opportunities for market makers, because they really need to think if they want to manipulate the market.”

Hyperliquid suffers North Korea security scare

However, Hyperliquid courted controversy in late December when MetaMask security researcher Tay Monahan shared that North Korea-linked hackers had been “testing” the platform since October. 

“Yall, DPRK doesn’t trade. DPRK tests,” Monahan said on X. 

North Korean hackers such as the Lazarus Group stole $1.3 billion worth of crypto in 2024, doubling their haul from 2023.

Monahan and others also noted concerns around centralization, with Hyperliquid only running around 16 validators at the time of publication — meaning that it could be more easily attacked by a sophisticated actor when compared to a decentralized network. 

And while centralization makes security more worrisome, Choi jested that there are underappreciated UX benefits that come from it as well.

“Sometimes the centralization makes it way better.”

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