The market is bleeding, HYPE stands out: Understanding the HIP-4 upgrade of Hyperliquid's entry into the prediction market Author: David, DeepTide TechFlow predicts a market transaction volume of $44 billion for the entire year of 2025. Polymarket contributed 33.4 billion, while Kalshi contributed 43.1 billion. One is the on chain 'truth engine', and the other is the 'event exchange' regulated by the CFTC. The two sides fought for a whole year, from betting on the US election to the Venezuelan coup, from betting on the Super Bowl to raising interest rates by the Federal Reserve. By the end of the year, even ICE, the parent company of the New York Stock Exchange, had invested $2 billion in Polymarket. Predicting the market has become one of the fastest-growing crypto tracks by 2025. On February 2nd, Hyperliquid announced the launch of the HIP-4 testnet. The official term is' outcome trading ', which means trading based on the outcome. A fully collateralized contract, settled within a fixed price range, suitable for predicting the market and option products. The news came out that HYPE rose by 10%. Accumulated increase of over 40% in the past week; As a comparison, BTC fell to $75000 at one point during the same period. The market clearly sees HIP-4 as a positive factor. But if you only understand HIP-4 as' Hyperliquid for prediction market ', you may underestimate the intention of this move and underestimate the value of Hyperliquid in the current encryption ecosystem. Firstly, what is HIP-4? Prior to Hyperliquid, its core business was perpetual contracts (PERPs): with no expiration date, leverage, and the risk of liquidation. This is the category with the largest trading volume of derivatives on the chain, and also the guy who feeds on Hyperliquid. But the outcome contract introduced by HIP-4 is almost the opposite. There is a maturity date, full collateral, no leverage, and no risk of liquidation. The contract is settled within a fixed price range, and the buyer can only lose up to the principal without owing any money to the platform. For example. Do you think BTC will rise above $100000 by the end of March? You can buy a corresponding outcome contract. If BTC does exceed 100000 upon expiration, the contract will be settled according to the upper limit, and you will make money; If not, settle according to the lower limit, and you will lose the cost of your initial purchase. No additional margin required, no forced liquidation in the middle of the night. This structure naturally adapts to two types of scenarios: predicting the market (betting on event outcomes) and option like products (expressing directional views within a fixed range). On Polymarket, your bet on whether Trump will be re elected is essentially based on this logic. Full mortgage, settled in two yuan. HIP-4 has made this logic a universal primitive, not limited to yes or no, supporting continuous price ranges. (Source: @ Eli5defi) Currently, HIP-4 is still in the testing phase. After the official launch, the first batch of markets will be planned by the official and priced in USDH (Hyperliquid's native stablecoin). The follow-up plan is to open up permissionless deployment based on user feedback, which means anyone can create an outcome marketplace. Do you think this sounds like a 'Hyperliquid version of Polymarket'? It's not that simple. Combinatorial, it sounds terrible but the most valuable Polymarket is an independent predictive market platform. The contract you bought on it has nothing to do with your position in Aave, liquidity in Uniswap, or any other agreement. Kalshi is the same. Each contract is an island. HIP-4 is different. The Outcome contract runs directly on HyperCore and shares the same trading engine and portfolio margin system with perpetual contracts. Ignas, a well-known DeFi researcher on the internet, pointed out a classic scenario after the release of HIP-4: while you long an ETH perpetual contract, you can also buy an outcome contract that "compensates if ETH falls below a certain price on the expiration date". Two positions are hedged against each other in the same margin account, and the system automatically identifies a decrease in risk exposure and releases excess margin. Translate: You use one position to express direction and another position to cover the bottom. Combining the two together takes up less capital than opening a separate position. This is called structured products in traditional finance. Investment banks help institutional clients with this combination and charge high transaction fees. Now Hyperliquid wants to implement it natively on the chain, without the need for intermediaries, and automatically recognize hedging relationships between contracts. Polymarket cannot do this, and neither can Kalshi. They are independent event exchanges, not derivative engines. So the outcome contract of HIP-4 is not so much a product as a primitive that enhances Hyperliuqid itself; A building block that can be assembled with other components. Predicting the market is just the most intuitive use of this building block. From HIP-1 to HIP-4, the four steps of Perp on the chain, and putting HIP-4 into the product evolution of Hyperliquid, make the logic clearer. HIP-1， Define token standards. Launched in 2024, allowing any asset to be natively issued on HyperCore, the first token minted using this standard was PURR. Equivalent to Ethereum's ERC-20, but running on Hyperliquid's own chain. HIP-2， Resolve liquidity. Automatically place buy and sell orders near the current price of the token, maintaining a spread of approximately 0.3%. The token has depth in the first second of its launch, and there is no need to wait for market makers to enter. HIP-3， Open permissionless perpetual contracts. Anyone who pledges 500000 HYPE can deploy their own perpetual contract market, customize targets, oracle machines, leverage ratios, and collateral types. Since its launch, the cumulative trading volume has approached 42 billion US dollars, with holdings exceeding 1 billion US dollars. Stocks, commodities, meme coins, everything has been opened by someone. HIP-4， Join the outcome contract. There is a maturity date, full collateral, and non-linear settlement. If you look at these four steps in a row, it is very similar to the continuous iteration and growth of an Internet product: issuing assets, giving liquidity, opening a contract market, and adding settlement tools. Thus, Hyperliquid has transformed from a perpetual contract DEX to an on chain derivative platform covering spot, perpetual, predictive markets, and options. Each step involves adding components to the same trading engine. Jeff Yan, the founder of Hyperliquid, once said, "The house of all finance must be creditably neutral." - The house of all finance must be trustworthy and neutral. Four HIPs are more like the four walls of this house. Pricing HYPE has increased by over 40% in the past week. The market is bleeding, while HYPE is going against the trend. This is definitely not entirely due to the HIP-4 message being sent out. In the past few weeks, several things have been fermenting at Hyperliquid: the unlicensed perpetual contract market for HIP-3 continues to increase in volume, hot precious metal trading has run out of data, and HYPE's repurchase mechanism is also continuously gaining chips. 97% of the platform's transaction fees are spent on repurchasing HYPE. But on the day of the HIP-4 announcement, HYPE pulled 10%, and the market at least considered this information valuable. I need to remind you of the role of USDH. All outcome contracts of HIP-4 are settled in USDH. USDH is the original stable currency of Hyperliquid, issued by Felix Protocol, and behind it is short-term US treasury bond bonds. The proceeds are used to buy back HYPE and stimulate DeFi activities in the ecosystem. This reinforces the previous flywheel: more product types go online (the sustainability of HIP-3, the outcome of HIP-4) -->more transaction volumes -->more transaction volumes generate more service fees -->service fees buy back HYPE -->more markets settle in USDH, pushing up the demand for USDH -->USDH's treasury bond returns feed back HYPE buy back -->HYPE's price rises -->improve the real value of HIP-3 pledge threshold -->attract more powerful builders to deploy new markets. The loop continues, but the prerequisite is that the transaction volume of Hyperliquid can continue to grow. And the current cryptocurrency market environment and prediction competition are both severe. The settlement of Outcome contracts relies on external data sources. Who won the election, at what price BTC expires, and whether a certain event occurred These pieces of information must be accurately and tamper proof fed to on chain contracts. Hyperliquid says it will use an 'objective settlement data source', but it doesn't say whose oracle to use or how to prevent manipulation. In the history of prediction markets, the controversy surrounding oracle machines has been the most common trigger for market crashes. Regulation is also a variable. In January 2026, a Massachusetts judge issued an injunction against Kalshi under CFTC regulation, determining that his sports contract constituted illegal gambling. Compliance exchanges cannot avoid state-level lawsuits, and decentralized agreements will not always be outside the regulatory scope. There is a more fundamental question, which is how big the predicted demand is. Looking at the 44 billion US dollars apart, over 90% of Kalshi is sports betting, while Polymarket's volume is concentrated in super events such as elections and geopolitics. The liquidity of daily forecasting demand is still very thin. There is currently no answer as to whether HIP-4 can attract incremental users or add an additional button between existing traders. However, Hyperliquid clearly does not want to be the next Polymarket, but rather wants prediction to become a native capability of existing trading engines, as fundamental and natural as perpetual contracts. When a Perp DEX begins to evolve, the logic of valuation may change.