Hyperliquid Strategies: Why Should We Reserve $HYPE?

CN
2 hours ago

Strong cash flow + connection to the traditional equity market, $HYPE is seen as a high-quality DAT target and a new darling on Wall Street.

Author: GLC Research

Translated by: Deep Tide TechFlow

In this issue, we will delve into the insights from the Hyperliquid Strategies interview hosted by Keisan @KeisanCrypto and Monk @defimonk. This interview features Bob Diamond @rediamondjr and David Schamis @dschamis, the founders of Hyperliquid Strategies, whose sole goal is to maximize the value of each share of $HYPE.

The discussion was filled with insights and passion, and we can't wait to share some key points with everyone.

If you missed this meeting, now is the perfect time to pause what you're doing and understand why we have a bullish outlook on $HYPE!

Not only do we have confidence in $HYPE, but smart investors like Keisan and Monk are also optimistic about it. Bob and David—two seasoned professionals with outstanding backgrounds in traditional finance—are also betting on $HYPE.

Bob and David are not ordinary investors; they have held significant positions at renowned institutions such as Morgan Stanley, Barclays, and Solomon Brothers, with decades of experience in traditional finance. They have been active observers in the digital asset space, and now they believe it is time to fully enter the industry.

Here are some highlights from the interview:

Question 1 (Monk): Why did you decide to create a DAT company focused on $HYPE?

Throughout their careers in traditional finance, Bob and David have focused on financial services companies—those that can generate substantial cash flow. They have invested in banks, insurance companies, and especially brokers and exchanges, giving them a deep understanding of this business model.

Because of this background, they believe it is unreasonable to buy tokens that lack product-market fit or revenue foundations. Therefore, over the past few years, they chose to observe from the sidelines in the crypto industry without rushing in.

Everything changed when their partner introduced them to the concept of $HYPE. $HYPE represents an exchange business model they are completely familiar with, boasting solid fundamentals, generating over $1 billion in cash flow annually, and using that free cash flow to buy back its own tokens. This opportunity was clear and almost impossible to ignore.

They quickly formulated an action plan. The initial goal was to raise $300 million, but they soon discovered that Paradigm and other major firms were exploring the same idea. To avoid competition, they chose to collaborate.

In a very short time, the fundraising scale reached an astonishing $888 million, far exceeding expectations. This not only reflects the strong interest of traditional financial investors in Hyperliquid but also showcases the immense appeal of $HYPE.

Of this funding, 65% was raised directly in HYPE, and 35% in cash, with approximately $300 million yet to be invested in HYPE.

Question 2 (Monk): How do you measure the potential demand for Hyperliquid Strategies?

They believe the potential demand for Hyperliquid Strategies will be very large.

Currently, most digital asset treasury companies focus on traditional crypto assets like Bitcoin and Ethereum. However, $HYPE is different because it is not easily accessible. Hyperliquid's exchange is unavailable to U.S. users, making it nearly impossible for ordinary American investors to purchase $HYPE directly.

Another important factor is that Hyperliquid is the only relatively new project to enter the top ten of crypto assets, rather than an established project that has been around for a decade. This creates a significant opportunity for them to promote Hyperliquid to investors in the coming months and even years.

Additionally, they particularly emphasize the quality of the investors behind Hyperliquid Strategies. The investor group includes respected institutions such as Galaxy Digital, Pantera Capital, D1 Capital, Republic Digital, and 683 Capital.

With a committed $900 million in funding at launch, their operational scale has far exceeded existing or potential competitors.

Therefore, they are confident in the strength of the investor team and the scale of capital, believing this will drive the success of Hyperliquid Strategies and attract strong market demand.

Question 3 (Monk): Has Hyperliquid Strategies started acquiring $HYPE?

The company announced the transaction in mid-July and expects to complete the closing in the fourth quarter. Since the transaction requires shareholder approval, a "sign-and-close" structure was adopted. This structure also allows contributors of $HYPE to exchange their held assets in a tax-free manner, avoiding taxable gains from low-cost positions.

As a result, due to this transaction structure, the company has not yet acquired any $HYPE or received cash proceeds. Once the transaction is completed, management plans to allocate most of the cash on the balance sheet into $HYPE, while retaining a small portion for operating expenses and as ongoing needs for the public company.

Question 4 (Keisan): What is your management strategy after accumulating $HYPE?

From day one, they plan to stake the $HYPE they hold to earn slightly above 2% returns. After a few months, they will begin to explore and cautiously evaluate potential DeFi opportunities on Hyperliquid that may offer higher returns.

However, they emphasize that these opportunities must carry little to no additional risk.

According to them, any further participation in the ecosystem only makes sense if the incremental returns can reasonably offset the increased risk exposure.

Question 5 (Keisan): How do you view the valuation metrics of $HYPE?

First, they focus on Free Cash Flow, although this metric may be somewhat complex due to circulating supply and unlocking mechanisms. However, even if a large-scale unlocking were to occur tomorrow, they believe $HYPE would still maintain an attractive trading level, although they do not believe this scenario will happen.

When they say $HYPE looks "cheap," it is based not only on traditional valuation metrics but also on growth potential. First, they believe Hyperliquid still has the opportunity to capture market share from competitors in other perpetual contract markets, achieving a degree of natural growth.

Additionally, they mentioned that @hyperunit has already increased spot assets and native deposits on Hyperliquid, believing that growth will also come from Unit and spot trading itself.

Regarding Developer Codes and HIP-3, they believe these two areas are just beginning to show potential. They are impressed by the team's execution capabilities and point out that with just a few lines of code, other front-end applications or wallets can integrate perpetual contract trading into their applications.

@phantom is a successful example, and the revenue generated from this integration is impressive. They also mentioned the opportunities for HIP-3 in other asset classes, which may eventually be traded through perpetual contracts.

They gave an example that if someone wants to start a stock trading business in a certain country, instead of building a new exchange or trading infrastructure from scratch, it would be more efficient to directly connect to Hyperliquid's core architecture.

They are excited about the idea of trading pre-IPO companies in the perpetual market, considering it very attractive. They cited Circle as an example: as shareholders, they are eager to see price discovery before its IPO, which had an offering price of $31.

In summary, they believe the valuation of the core business is already very attractive. Coupled with Developer Codes, HIP-3, and other features that can be built on Hyperliquid, these can create revenue for the protocol in a permissionless manner without significantly increasing operational costs. For instance, the integration with Phantom did not require the team to add new personnel; the existing team of 11 completed the work.

Finally, they shared an anecdote: when they were preparing to go on CNBC, a well-known figure in the crypto space told them, “You should go on CNBC and say that Hyperliquid will one day surpass Nasdaq.”

While it sounds a bit crazy, it is not impossible for them.

Question 6 (Keisan): What is Hyperliquid Strategies' plan for acquiring $HYPE after launch?

Keisan asked about Hyperliquid Strategies' acquisition strategy post-launch and compared it to Tom Lee's strategy at Bitmine.

They explained that as long as the company trades at a premium above net asset value (NAV), they will continuously seek to raise additional capital to acquire more $HYPE.

Additionally, they plan to explore using other financial instruments, focusing on those that individual investors cannot access on their own. Their goal is to enhance the NAV premium through the use of specific tools while always ensuring the safety of the underlying asset $HYPE.

Question 7 (Keisan): Under what circumstances do you think you would sell $HYPE?

David stated that he would not completely rule out the possibility, but the only scenario he could think of where they would choose to sell $HYPE is if the company's stock price were significantly discounted. He emphasized that he hopes this situation never occurs, but ultimately, they have a fiduciary responsibility to the shareholders of Hyperliquid Strategies.

In his view, the goal of any public company is to increase the book value per share for investors, and his preferred way to achieve this is for the company to trade at a premium, allowing it to issue stock and acquire more $HYPE.

Question 8 (Monk): What misconceptions do you think the market has about DAT?

Bob emphasized that $HYPE is fundamentally different from other DATs (Digital Asset Treasuries). He pointed out that the exchange excels in cash generation, continuous buybacks, trading volume, and operational efficiency while rapidly capturing market share.

In his view, Hyperliquid Strategies is objectively creating a highly valuable DAT because it will enable U.S. stock investors to access $HYPE.

David added that there is still a significant amount of capital that can enter the U.S. stock market but cannot access the crypto market. Despite the crypto market performing exceptionally well over the past decade, its scale is still far smaller than that of the stock market. For him, this underscores the necessity of DATs and why they should trade at a premium.

This is especially important for Hyperliquid Strategies, considering the difficulty of acquiring $HYPE.

Finally, he concluded that regardless of MicroStrategy's premium, Hyperliquid Strategies' premium should be higher.

Question 9 (Keisan): Is there anything else you would like to share about $HYPE and the broader ecosystem?

David stated that they are very much looking forward to introducing $HYPE to global audiences on platforms like CNBC and Bloomberg, and they are also excited to interact with the community and the broader Hyperliquid ecosystem.

In response to a question from @andyhyfi at @HypurrFi, they explained that the current macroeconomic and regulatory environment has significantly improved compared to the Biden administration, during which Gary Gensler took a highly repressive and negative stance toward the crypto industry.

In their view, the current situation indicates that the U.S. is making more strides in the right direction, creating a more favorable environment for innovation and progress. They noted that many influential figures in the U.S. have publicly praised the crypto industry, and the largest companies are making significant investments in the blockchain space.

In this context, it is hard not to feel optimistic about the future of the industry.

Conclusion (@GLC_Research)

Thank you all for sticking with us to the end; we thoroughly enjoyed the process of organizing and creating this interview.

Fresh and profound voices are not common in the crypto community. Therefore, we particularly value the contributions of these experts from the traditional finance (TradFi) sector who joined the discussion and spoke so passionately about compelling crypto assets like $HYPE.

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