Why is HYPE considered the most undervalued asset in the crypto market? A deep analysis by the founder of Hyperliquid Strategies.

Author: GLC Research

Compiled by: White55, Mars Finance

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

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

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

Not only do we have high hopes for $HYPE, but also smart investors like Keisan and Monk are full of confidence in 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 important positions at renowned institutions such as Morgan Stanley, Barclays, and Solomon Brothers, possessing decades of traditional finance experience. They have always been active observers in the digital asset space, and now they believe it is time to fully enter this industry.

Here is a highlight recap of 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 in particular, brokers and exchanges, which has given them a deep understanding of this business model.

It is precisely because of this background that they believe it is unreasonable to purchase tokens that lack product-market fit or a revenue foundation. Therefore, over the past few years, they have chosen to observe from the sidelines of the cryptocurrency industry without rashly entering.

Everything changed after their partners introduced them to the concept of $HYPE. $HYPE is a trading exchange business model they are completely familiar with, boasting strong fundamentals, generating over $1 billion in cash flow each year, and using this free cash flow to buy back its own tokens. This opportunity seems clear and almost impossible to ignore.

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

In an extremely short period, the scale of fundraising 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.

In this funding, 65% is raised directly in HYPE, 35% is raised in cash, and approximately 300 million USD has not yet been invested in HYPE.

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

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

Currently, most digital asset treasury companies focus on traditional crypto assets such as Bitcoin and Ethereum. However, $HYPE stands out because it is not easily accessible. The Hyperliquid exchange is unavailable to U.S. users, making it nearly impossible for the average U.S. investor 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 old project that has been around for ten years. This creates a huge opportunity for them to promote Hyperliquid to investors in the coming months or even years.

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

With the promised funding of 900 million dollars at launch, their operational scale has far surpassed existing or potential competitors.

Therefore, they are confident in the strength of the investor team and the scale of capital, believing that 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" approach was adopted. This structure also allows contributors of $HYPE to exchange their held assets in a tax-free manner, thereby avoiding taxable gains arising from low-cost positions.

Therefore, due to this transaction structure, the company has not yet acquired any $HYPE, nor has it received any cash proceeds. Once the transaction is completed, management plans to invest most of the cash on the balance sheet into $HYPE, while retaining a small portion for operational expenses and as a continuing requirement for the public company.

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

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

However, they emphasize that these opportunities must have almost no or completely no additional risk.

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

Question 5 (Keisan): What is your view on the valuation metrics of $HYPE?

First of all, they focus on Free Cash Flow, although this metric may seem a bit complex due to the circulating supply and unlocking mechanisms. However, even if a large-scale unlocking occurs tomorrow, they believe that $HYPE will still maintain an attractive trading level, although they do not think this situation will happen.

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

In addition, 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 Builder Codes and HIP-3, they believe that these two areas have just begun to show potential. They are impressed with the team's execution and point out that it only takes a few lines of code for other front-end or wallets to integrate perpetual contract trading into their applications.

@phantom is a successful example, and the revenue performance brought by this integration is impressive. They also mentioned the opportunities of 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 is better to directly connect to Hyperliquid's core architecture. This approach is more efficient.

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

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

In the end, they shared an interesting 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."

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

Question 6 (Keisan): How aggressively does Hyperliquid Strategies plan to acquire $HYPE after its launch?

Keisan raised a question about Hyperliquid Strategies' acquisition strategy post-launch and compared it with Tom Lee's strategy from Bitmine.

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

In addition, they plan to explore the use of other financial instruments, focusing on those that individual investors cannot access on their own. Their goal is to enhance the net asset value (NAV) premium by using specific tools while always ensuring the security 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 this possibility, but the only scenario he can think of is that they would only choose to sell $HYPE when the company's stock price is 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 publicly listed company is to increase the book value per share for investors, and the way he prefers to achieve this is for the company to trade at a premium, allowing it to issue more shares 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 has excelled in cash generation, ongoing buybacks, trading volume, operational efficiency, and rapidly seizing market share.

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

David added that there is still a large amount of capital that can enter the US stock market but cannot enter the crypto market. Although the crypto market has performed exceptionally well over the past decade, its scale is still far from that of the stock market. For him, this is precisely the necessity of DAT's existence and the reason why they should trade at a premium.

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

In the end, he summarized that regardless of the premium of MicroStrategy, the premium of Hyperliquid Strategies 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 as well as the broader Hyperliquid ecosystem.

In response to a question posed by @andyhyfi at @HypurrFi, they explained that the current macroeconomic and regulatory environment has significantly improved compared to the Biden administration period. At that time, Gary Gensler had a highly repressive and negative attitude towards the crypto industry.

In their view, the current situation indicates that the United States is taking more steps in the right direction, creating a more favorable environment for innovation and progress. They point out that many of the most influential figures in the U.S. have publicly praised the cryptocurrency industry, while the largest companies are making significant investments in the blockchain space.

Against this backdrop, it is hard not to feel optimistic about the future of the industry.

Conclusion (@GLC_Research)

Thank you all for sticking with us until here; we really enjoyed the process of organizing and creating this interview.

In the crypto community, fresh and profound voices are not common. Therefore, we particularly cherish the participation of these experts from the traditional finance (TradFi) sector in the discussion, passionately talking about eye-catching crypto assets like $HYPE.