Hyperliquid’s 3x HIP-3 fee hike divides analysts – Lose users or boost HYPE?

The Hyperliquid project team announced a 3x fee increase for HIP-3 (tokenized asset perps) in the next network upgrade. 

According to Hyperliquid founder Jeff Yan, the fees will be applied to specific listed assets and not a blanket increase. The team noted that currently the HIP-3 deployers are in ‘growth mode,’ meaning the fees are discounted by 90%. 

As the segment matures, the project wants to reduce the discount, allowing the deployers to increase their fees by up to 3x. There was no shared timeline for the above upgrade. 

However, for Ryan Watkins, founder of the crypto-focused venture firm Syncracy Capital, the move would be net positive for revenue.

Few people are pricing in HIP-3 revenue acceleration from fee increases. While I don’t expect dramatic changes overnight, I do think gradual fee increases are in the cards, with even small changes leading to multiples more revenue.

Currently, the protocol splits revenue halfway with deployers. So if TradeXYZ makes $100M, it will be $50M for the deployer and another $50M to Hyperliquid as protocol fees.

Out of this, 99% goes into the Assistance Fund for HYPE buyback while 1% goes into HLP, the Hyperliquidity Provider. 

As such, the upgrade will be bullish to HYPE too, analyst Tobias Reisner noted. 

If people are willing to pay higher fees to trade stocks in HL vs other venues, that would be very bullish. More fees = More HYPE burned.

According to Watkins, even a gradual fee hike would massively improve HIP-3 revenue. 

Will a fee hike affect Hyperliquid adoption?

But critics were concerned that the move would force traders to look for less expensive venues to trade. According to analyst Wazz, the fee hike was “insane” and would remove the pricing moat that Hyperliquid enjoyed.

In my opinion, HIP-3 has only remained competitive and attracted so much capital because of the very low fees, and in some cases they still lose out to brokers like IBKR.

That said, HIP-3 volume now accounts for +60% of total Hyperliquid trading volume, meaning it also drives the revenue front. The segment is mainly dominated by TradeXYZ. 

However, whether the above traction will be affected by the upcoming upgrade, as claimed by critics, remains to be seen.

Separately, Hyperliquid released its Q2 performance report, posting a strong revenue recovery that climbed to $57.5M in June. This was a record high since last November. In fact, HYPE decoupled from the broader market and posted a 79% gain to a record high.  

But the revenue tanked in July to $38M, affecting even the pace of the HYPE buyback program.

The token was up 13%, but a short-term bullish uptrend could only be confirmed if the $60 level (50-day EMA) is reclaimed and decisively turned into support. 

Final Summary

• Hyperliquid to replace 90% discount in HIP-3 market and increase the fee by 3x.
• HYPE recovered 13%, but extended short-term uptrend depends on reclaiming $60.