All right, guys. This is the trading panel. All right, we're going to be talking about perps. We're going to be talking about Hyperliquid. My first question is about Hyperliquid. Okay, so here's the question: What did Hyperliquid do right? Each one of you is building a perp DEX — or not perp DEX, but you build some trading, something trading-related. Hyperliquid is the darling of this cycle. What did they do right, and what are you learning from them? Anybody, go.
Yeah, I can go. I think back in the day, dYdX was the dominant perp DEX. One of the things that Hyperliquid did was they were really quick to list tokens, and that was one of the problems that dYdX had — they weren't able to list faster. So, I don't know if you guys remember, Hyperliquid is even listing like front-type tokens. So, that was a big thing. They also did pre-IPOs, they did pre-listings for tokens. So, they really did a great job of listing products that people wanted to trade. And then the obvious next one is HLP. The liquidity provider that they built was massively helpful because every perp DEX needs liquidity. They need market maker support, and again, they knocked it out of the park with HLP for providing liquidity to all these newer markets — markets that no other market maker would probably support. So, I think those two things definitely helped them take off massively.
Aggressive listings, liquidity from HLP — what else?
It's two things. One is they made it so that you could do something that you couldn't do anywhere else, which is you want to be able to trade oil during the war, right? So, that was their sort of inflection point. It's like, here's this really important thing you really want to do that you have...
Hold on, hold on, hold on — but that came much later. Hyperliquid was already huge by the time Trade XYZ came around.
I would say not really. Not in the broad...
Hyperliquid blew up last year.
It really in CT. I'm talking about...
Okay, you're talking about it like on the Wall Street Journal. Okay, okay, okay, fine, fine, fine.
Okay, and then before that, what actually blew them up was — yeah, okay, great infra, you know, all of it works. Jeff was God. Because Jeff was God, because everyone thought Jeff was God.
Hold on, hold on, hold on. What does that mean, because Jeff was God?
Well, it's about, you know, perps are a very technical product. A lot of people have taken a stab at it. And so, you know, you couldn't have, like, you know, someone who built a launchpad come in and try to tackle the problem and people would just believe that it works and, okay, I trust this product. What it took was for the market to believe that the team that was building it was brilliant. And Jeff created an aura of brilliance that no one else had. And so, when push came to shove, they got all the liquidity.
That came after. The key thing, which was their — I think what they did really well early on was when you compare their product to the last iterations of perp DEXes in the last couple cycles. You had GMX, you had dYdX. I think that their architecture of having this kind of, you know, matching engine that could process huge throughputs of orders and with really low latency combined with HLP. HLP bootstrapped the liquidity, and then they were able to get significant liquidity and volume from traditional desks that can hedge directly on venues like Binance and really kind of build out this base layer of liquidity. Second thing I think they did extremely well, which is super hard to do well, was their token launch. They had no supply overhang, they bootstrapped the company, very little sell pressure, and they got that token in the hands of people that don't sell and instead just put that capital back into the platform and continue to trade. And yeah, I think that it was really just product, liquidity, and then the token launch — if done too early, can be the end of a company if done incorrectly. It's the last chance you get to fundraise, and I think they did that very, very well. And then I think God — or I think Jeff then became this God figure from the token.
Yeah, I think it's an interesting question of like, let's say that Jeff, instead of being Jeff, was like, I don't know, some very uncharismatic — you know, because in reality Jeff was not super public. He was, you know, he's not a very loud and, you know, garrulous founder. Many, many people are a lot more out there.
I think a lot of this is retrospective, right? It's like you sort of say it after it's over. People used to say this about SBF was that, oh, he's so brilliant, he's got this, you know, this cult of personality around him. And then the reality is that when you are successful, people will build a cult no matter who you are. And I think that said, the question I have for you then is: what are the openings of Hyperliquid for new players to come in and disrupt them? So they had their shot at dYdX. dYdX was dominant when they came in the game. Binance went at BitMEX. BitMEX used to be dominant. Binance came in, took their shot at them. What's the shot at Hyperliquid?
I would say that, you know, their perps product is primarily a whale product, and it's not very obvious that Hyperliquid has done the job of attracting lots of retail users. If you look at the number of people that trade on Pump versus the number of people that trade on Hyperliquid, there's many, many, many more people that trade on Pump. Many more people that trade on FOMO. And so I think when it comes to like HLP and doing outcome markets, you know, I'll say like I was at Polymarket, and, you know, there was a lot of people there who were potentially really concerned about — and I always was on the side of like, Jeff hasn't done the work to prove that he can get 10 million traders. He hasn't done that. And so I think if you want to build something really big, I would — I mean, this is how I'm approaching my business, is trying to go after the broader public in a way that allows them to trade more intelligently.
Yeah, and I think just adding on to that point. So, if you look around the landscape right now, I think last month about a thousand accounts did 86, 87% of the volume on Hyperliquid, which is not that unusual for large exchanges. But if you add on top of that that the highest monthly active users for them ever has been 300,000 addresses — that's not even unique people — that is just so small when you compare to Binance's 300 million retail users, Coinbase's 7 million monthly active users. And I think that that doesn't come just — you get the volume from liquidity and a fast exchange. You get the retail users from just kind of an entirely different product. You need to appeal to different levels of investor sophistication. You need to have a brand that people trust. You need to have a marketing team. You need to go to market in a different way. Which, you know, I think that it's not right or wrong, it just depends which user you're catering to. And I think that's really where the gap is, is closing this massive discrepancy in mass adoption between DEXes and the centralized exchanges that still exist. And I think, you know, it's going to take the products and the brands that appeal to the masses, and yeah.
Yeah. You know, everyone talks about Hyperliquid, like the much more interesting business to me is FOMO, right? And...
Because they — my brother works, he's a project manager in like the real estate world, and he was telling me about FOMO. Okay, they cracked something, right? My brother doesn't know what Hyperliquid is, right? So, they cracked something in a way that resonated with the broader public. Now, what I will say is, you know, the same with it's Pump and FOMO, and the reason why I think like Polymarket is a more interesting business is that, you know, FOMO and Pump are like just really terrible for their users, like just max extraction, right? And like people want to talk all kinds of about Polymarket or even Kalshi or any of these businesses, but like at the end of the day it's a product that people really want and they do it in like a reasonably fair way, right? And so for me the thing that most crypto founders should really understand is like how do you build something that like people actually want — not fake want, really, really want — and how do you do it in a way that resonates with them? And to me it's just like, you know, the way that I look at what we're building, like everyone has sort of like a north arch nemesis, you know, who's our arch nemesis? And for me I think of it as ChatGPT and Claude. ChatGPT and Claude is your arch nemesis. Yeah, because at the end of the day people are going to start trading agentically. It's going to happen, right? And the question is, are they going to do it directly from ChatGPT, and is there going to be a couple integrations that they do that just completely murders me? Or is there a way for an exchange to offer a unique, differentiated experience that makes it so that they come to me when they want to trade agentically and not Claude or ChatGPT?
Okay, so let me reframe the question slightly then, because each of you has different angles of attack that you've articulated about how you want to go at the trading market. So I guess I'm guessing I already know the answer for you, but do you want to kill Hyperliquid, coexist with Hyperliquid? Kill or coexist?
I mean, I want to kill everyone, but I could live with coexisting.
You could live with coexisting. Kill or coexist?
Coexist, because like we're completely different angle, right? We're doing on-chain composable perps, and Hyperliquid's a black box, right? So that's why we're building on a general-purpose L1. So, you know, Hyperliquid's doing a great job of opening the market, bringing more people on-chain. We have our own vertical that we're focused on.
Yeah, I don't — I think their outcome is decoupled from ours, so coexist.
Coexist. Okay, okay. You're the only one who wants to kill, even though ChatGPT is your actual competitor. Okay, so the one trap that a lot of new exchanges fall into is, of course, a lot of the traders who end up trying new products very early — they tend to be farmers. And a lot of these new exchanges, they have very high numbers, and then as soon as CGE happens, they get washed away in the tide. And it turns out these new exchanges were just token farms. How do you avoid that? What have you seen in the mistakes that others have made that you are thinking about as you're building your product to avoid becoming a token farm?
I think it's literally building something that's unique that people want. I think if you're trying to build another one app-chain perp DEX, it's going to be hard. It's going to be...
But how do you know? I mean, all these people thought they were building something someone wanted.
Exactly. But like if you're just going to be copying somebody else's tech, it's just not going to work. Same thing with like Lyra, right? Like they did an alt to app-chain, they innovated on the fee model, variationalizing RFQ, and providing all these assets. I think you just have to build something that's net new. I think you can obviously compete like the BD and other angles, but that's how you differentiate — basically novel financial primitives that people can build on top of. And then after that is making sure that you cater to your customers and solving their problems. Pretty much that.
You just don't launch a token. No, I'm kidding, I'm kidding, but only partly. I think that the problem really happens when the token or the incentive becomes the product that everyone's after. And so if you look at what that means, I actually think that you shouldn't be launching incentive programs if that's the only reason that anyone is using your product. I think that it's just a zero-sum game. People are going to value extract, and the business is going to fail. So what you should spend time doing is just finding a very specific user base that you can solve their problems or offer them a 10x improvement to their current solutions. And once you find that small user base and you build the product, the brands around them, and you have some stickiness, I think then launching a token is essentially just like the most capital-efficient way to fundraise and kick off that growth flywheel. So, if you want to go that route, you can launch a token, and that starts kind of the growth flywheel, and that's kind of, you know, generally the end of your fundraising. I think alternatively, you can approach the market more like a traditional business where you go and raise additional rounds of capital and really kind of double down on just growing that core user base and just continue to focus on them. So, I think it's like an extremely effective tool, but you need to do it at the right time, or you're just killing your business and you're doing it so that you can have a few months of crazy volume and plus some fees.
Okay. Let's talk about the end game. So, one thing you see over and over again from exchanges is that very often they specialize in one thing, and over time they start adding more products and adding more products and adding more products, and before you know it, they've all got the exact same product suite. So, Coinbase has become, Robinhood has become, Binance has become, you know, Hyperliquid is now doing the same thing. Pretty soon they're going to add card ripping. How do you think about the end game for you guys? Is that inevitable for exchanges that they all become the same thing? Or is this just the meta has gotten saturated, people aren't trading crypto, people are getting desperate? What, like, how do you describe the state of play right now?
I think the clearest sign that exchanges are essentially commodities is if you look at like the US market. Like it's exactly as you said, Coinbase, Robinhood, like Gemini, they're all the same thing. It doesn't really matter. And who actually won? It's like the better UX and the better brand, and that's Robinhood, right? Which is like not very different than what you see in the soft drink market, where it's like pure commodity, Coca-Cola is just like, it's Coca-Cola, right? So I think sort of like the current paradigm is kind of for everyone. And I think the way you actually win and do something different is you need to kind of go upstream of the markets, right? The markets are — every exchange, every brokerage is going to offer every single kind of product. If you are trying to differentiate on markets, you are doomed. And so go upstream of that, and what is there to do? Well, I think it's focus on execution, right? And there's different ways to focus on execution, and obviously we have our own kind of direction, but you need to make it so that the user has a different way of buying and selling. That's why FOMO's interesting, right? They basically turned like copy-trading Telegram bots into an app. And so they went upstream, and I think the winners going forward are going to go upstream and focus on execution.
So you — okay, so let me hash this out a little bit. So you're saying, okay, if you're an exchange, the end game is Robinhood, you'll never be Robinhood. That's like being Coca-Cola, you're never going to make a soft drink that's going to displace Coca-Cola. So you got to take some other approach, and the model for you is FOMO.
Yeah, I mean they're just interesting right now, they're winning right now, they're doing great. But like the real thing is what is the thing you're offering that is different than just the markets. FOMO made it, okay, I can very quickly copy trade anyone, all these winners, and blah blah.
Like a totally different modality.
It's totally what everyone else is doing. Exactly. And so you have to think, I think, you know, even copy trading is just like a small glimpse into what's actually happening, which is it's bots, right? Like Telegram copy-trading bots was the thing that they productized, right? And so what you actually want to do is think further. It's like if it's bots, well, it's actually agents, right? It's actually programmatic, it's actually about how do we have users that find edge in different ways. And that to me is what's interesting and that's what's defensible.
