Asset manager Ark Invest is pessimistic about Hyperliquid’s ability to achieve its “house of all finance” vision, despite the platform’s growing traction.
In particular, the firm questioned how the platform wants U.S. market access yet has limited decentralization, a partially anonymous team, and nearly non-existent spot trading.
In an X post, Lorenzo Valente, head of crypto research at Ark Invest, poked holes in the regulated US pathway via Kraken.
I think what $HYPE is doing with Kraken in the US is slightly different. The liquidity can’t simply be commingled with the broader permissionless Hyperliquid market. That probably means a way worse product. Think Binance vs. Binance US.
Worth noting that in August, Valente had recommended that Hyperliquid pause buybacks and buy out the Gemini exchange for its U.S. expansion. The U.S. users would be ring-fenced, just similar to Kraken’s plan.
However, he was right on the spot trading aspect of Hyperliquid.
HyperCore has both perp and spot order books. But spot is basically nonexistent on Hyperliquid. You can become the best casino in the world without spot. I’m not sure you can become the financial system.
Is Hyperliquid’s ‘everything exchange’ plan at risk?
RWA, or real-world asset perps, dominates Hyperliquid’s volume. In the past 24 hours, the spot volume was about $271M. In contrast, its perps segment had $12B in volume and $16B in Open Interest (OI).
Similarly, on decentralization, the L2 has about 27 validators, which is way fewer compared to Solana’s 900 or Ethereum’s +900K count. Whether this will be raised before the final US approval remains to be seen.
That said, the platform’s ‘everything exchange’ plan seems to be on track despite these limitations. For instance, it has rolled out prediction market support via HIP-4. Beyond its popular crypto perps market, the RWA perps became popular earlier in the year.
In September, it launched native borrowing and has done over $340M in borrowed assets as of writing.
Clearly, this shows that despite low spot trading, other aspects are picking up pace to cement the “everything exchange” vision.
In fact, an a16z report found that RWA perps have grown 44x this year to over $117B in volume, and DEX platforms led by Hyperliquid have outpaced centralized exchanges. Now, on-chain venues account for 86% of RWA perps volume compared to CEXs’ 14%.
It remains to be seen whether the strong RWA traction and other Hyperliquid markets will generate more revenue and buybacks to fuel $HYPE’s value.
Final Summary
- Ark Invest warned that Hyperliquid-Kraken’s product for the US market will be ‘worse’
- The platform has expanded into native borrowing, prediction markets, RWA perps, and more, reinforcing its “everything exchange” vision.