Why Hyperliquid Is Still Undervalued - Bitwise Head of Research

Transcript

All right, you guys. We are here live at the tokenization tower with Ryan Rasmusen, head of research at Bitwise following the meteoric rise of both the Bitwise and 21 Shares ETF launches of hype. Notably, other ETF uh products that they have doing a lot of work in the space. Ryan, welcome to the tower. Good to have you on the show again, man. Great to be here again. >> Big week for you guys. >> That's right. Yeah, exciting week. >> Yeah, man. It is. Um maybe just walk us through like the last week internally. What what's been going on? >> Oh, man. Uh well, so much goes into the lead-up to launching one of these ETFs.

You're working with regulators, you're working with market makers, you're working out all the operational nuances of of seeding the funds, etc. But really once it goes live, you see what all that work leads up to. And there's been tremendous uh adoption and response to the launch of these hype hyper liquid ETFs, right? And of course, the price going up has it has a function of to do with that and caused by that. But uh nonetheless, we're seeing tons of demand obviously for these things. The largest hype ETF in in the world. So, we're really excited about that. >> Yeah, man. I mean, it's it it seems like you guys caught a lot of other issuers asleep at the wheel on this one. Like what happened there? Was it a regulatory thing? Was it a knowledge of the market thing? Is it just like being in the

know? Like like why was it just two issuers that that they they got this done seemingly at the same time? And now Grayscale's, you know, kind of trying to catch up and a couple others. Usually like the bigger names, let's call it BlackRock or some of these larger ones, maybe they wouldn't dip their toes into smaller assets. So, like what what happened here? >> Yeah, I mean, it's a good question. There's always trade-offs here in terms of what assets ETF issuers want to focus on, right? And when you have crypto specialists like Bitwise, it's easier to survey the space, know which assets have strong narratives, strong fundamentals, and that we think are going to be long-term valuable ETFs to have in the space. Other asset managers maybe don't focus solely on crypto are also using their resources to file ETFs or or build funds in other areas of financial

markets. And so, from that perspective, I think crypto specialists like Bitwise have an edge. That's why you don't see larger asset managers necessarily dipping their toes here. The regulatory elements of it do play a role, but you know, you file for these things months and months in advance, and then it sets off these sequence of events and in meetings with regulators, etc. And so, it's not like it's you know, it's publicly known that there has been filings for these, and then it all kind of plays out from from there. But I think as crypto asset managers and crypto specialists, like we we pay so much attention to what's going on in the market. We have 200 people at Bitwise who spend all day, every day looking at crypto markets. We have on-chain solutions, public funds, etc. And we talk to investors, and we've seen the

demand for hyper liquid both on-chain and from speaking with investors build up for months now. I'm really happy to have, you know, the world's largest hyper liquid ETF now out there staking natively in-house and and some other cool features as well that maybe we'll talk about. >> Yeah, I saw that. I saw there's like there's wallet trackers going crazy right now about the purchases of hype and staking. And so, we're going to get into that. We're going to get into the thesis. But I think there's still a little bit of confusion on how these things work, even just, you know, from the top level with Bitcoin. People kind of assume that the ETF $1 into the ETF is the equivalent of $1 of buying power on hype, but it's not always that straightforward and simple. Maybe you could just kind of unpack like the the

flow here. Like like educate us on how the flows work. >> People come in on their brokerage account, they buy the ETF. >> They buy Is it H Y What's the ticker? >> BHYP. BHYP, yeah. >> BHYP, they buy that, right? Let's say they buy 100 grand of that. What happens then in the in the kind of back end to to get that that cash or that, you know, asset into hype and then staking it? Like is it just one-to-one? Walk us through like how these flows kind of work. >> Yeah, so for the most part, it's one-to-one. Now that Now when you go into your brokerage account and say you want to buy $100,000 worth of an ETF, you you can be You're buying it on the secondary market, right? Someone else who's looking to sell $100,000 of ETF is

selling to you for the most part. And when there's more demand than there is supply or vice versa, that's when you start to get these these market makers involved and these authorized participants who actually go and take in the capital, they go and give it to the ETF issuer. The ETF issuer creates new shares of the ETF to give to the market makers, then they go and sell those on the secondary market. So, there is this kind of sequential process that happens, but you can think of it more broadly as a dollar into a beehive ETF is going to go to buying hyperliquid, and then those assets are staked, and we stake in-house at Bitwise, and you know, of course that helps investors realize more of the overall rewards cuz you're not paying a third-party staking provider some fee,

etc. But, a dollar in a dollar into hyperliquid is really the best way to think about it. >> Okay, and I haven't looked, you know, into the whole prospectus and everything, but is the is the kind of memorandum here that you guys are operating like on a daily basis in terms of like equalizing the ETF? So, if you have, you know, how how many inflows versus outflows, you you guys are settling at the end of each day to make it kind of even? >> Yeah, exactly. So, so ETFs have intraday liquidity, meaning that they they are trading all day every day as opposed to like mutual funds which strike a NAV at the beginning and end of of each day.

And so, the thing about this is that our team is working with the market makers and what's called authorized participants and trading desks to facilitate this capital flow all day so that the market price you pay for the the hyperliquid ETF reflects the underlying NAV of the fund. And the NAV is just the net asset value of the underlying hype assets themselves. And that's a flow that's going on all day throughout the trading day. And then, of course, the end of the day, you strike an end of day NAV, which is what it opens up at the following day and you kind of just move throughout the trading week like that.

>> You know, I asked that because HYPE's been especially strong during the US trading hours as of the last week or so. Like especially strong. And then kind of like dwindling a bit overnight and then each morning it seems like there's this, you know, persistent flow. >> Yeah. >> So, to get into the thesis a bit, Matt um your CIO at Bitwise put out a tweet basically saying that everything clicks for allocators when they understand that the entire MO of Hyperliquid is to make a bunch of money on trading fees, take that 99% of those fees and go back and buy the underlying.

>> Right. >> And I quote tweeted that yesterday and put out a a clip about it and was basically saying like the incentives are so aligned here. It's very simple. If you are an ETF issuer, your your MO is to get AUM. You want to be selling your products to clients and who are going to believe in these products and want to hold these products. Hyperliquid is a very easy sell because of all the features that it has. And so the incentives are aligned for Bitwise to go and kind of talk about HYPE to their institutional network because it just makes sense. Compared to a lot of L1s, other assets. Now, we don't need to get into the comparison game here, but talk to us about the appetite for allocators and who have a traditional lens on

investing when they hear about Hyperliquid and the, you know, over a billion dollars or so of of free cash flows each year going back to buy the asset. They hear the story. Like what is that lightbulb moment kind of more in detail look like? >> Yeah, well, I mean, it really is a lightbulb moment. When you think about traditional allocators, you really have to separate Bitcoin from other crypto assets because they understand the narrative for Bitcoin is digital gold. It's this digital store of value that serves the same purpose. And and two things are true. One, they've accepted that gold doesn't generate cash flow.

and so they don't need to get over this fact that Bitcoin doesn't. They can accept that it's an analogy, a digital version of gold, and to not all allocators allocate to gold, and so naturally they're not going to allocate to Bitcoin. You just have to accept that not everyone is going to invest in Bitcoin, just like everyone doesn't invest in gold. Now, going to the other crypto assets, once you get beyond Bitcoin with allocators, then they want to know, "Okay, if these aren't like digital gold, what's the selling proposition? What Why does it have value?" Right? And then you start talking about cash flow. And it's been difficult, you know, particularly in bear markets, but for a lot of crypto assets in general, it's been difficult to justify the valuation with the level of revenue that they generate, right?

The level of fees that they generate. Hyperliquid, it's such an obvious story, and these investors allocate to stocks, they understand that, "Okay, you want to generate cash flow, that cash flow accrues to shareholders." You explain what happens with Hyperliquid, right? Generates fees on all of this trading activity. Those fees are used to burn to buy and burn hype tokens. As a hype investor, that feels a lot like a stock buyback. It's just programmatic. And when you stack that up against traditional equities, it's a relatively high buyback, right? It's It's a larger buyback program than most of the companies in the S&P 500. I think the average buyback is something like 2% in the S&P 500, and it's something like 5% when you do the math on Hyperliquid, at

least So, from that perspective, it becomes an easier sell. Our goal is to provide the best menu of investment options for our investors, and then help them through that journey into which products they want to allocate to, and they all have different mandates of what they can can't invest in, should shouldn't invest in. They have different goals in terms of risk risk, you know, adjusted returns and ratios and things like that. And so, our goal is to help them on that journey, and we think Hyperliquid is a a important piece of that broader menu of options for them to choose from.

>> Yeah. Yep. And so then let's get into kind of that conversation. I assume the question is, all right, bull case, bear case, what are my tail risks here? What am I What do I need to understand to understand what I'm investing in? Could you maybe just provide us what the what the like the bull case is here? What you see as like the like the opportunity in the TAM? And then similarly the bear case, what is the risks that you are educating investors on? What are the tail risks? What are the things that they should understand before looking into hype as a as an asset?

>> Yeah. I love that you asked that question because what I feel like a lot of the crypto industry doesn't necessarily accept or crypto natives don't accept is that investors have to look at both the upside and the downside, right? Yes, there's potential for higher returns in crypto, but that comes with certain risks. And so we do educate on both of those things. The way that conversation goes is I think we first zoom out when we talk about what's happening in the long-term trajectory for crypto. You have the largest You have the largest regulators in the world. You have the largest asset managers in the world. Larry Fink, CEO of the largest asset manager. Paul Atkins, the most important financial regulator in the world. They're saying all assets are going to be on blockchains in the future. And they're not talking about 20 years from now,

they're talking about 3 years from now. You see the regulation making its way through the SEC with project crypto and other initiatives where they're laying the groundwork. You see asset managers actively tokenizing funds and building out the infrastructure to do that. You see the Nasdaq working with Kraken for tokenized stocks. You see the New York Stock Exchange working on their own tokenized stock initiatives. Okay. So the big picture is assets are moving on chain. >> Yeah. >> How big is that market? It's It's literally in the hundreds of trillions, right? So the next question is, where are they moving on chain?

One of the natural places they're going to go right now that's that is to the most efficient and the best technology and Hyperliquid is is up there with the best of them. They're extremely fast, extremely low cost. They do this this trading extremely well of derivatives and spot. They're rolling out really interesting features, right? Like they just rolled out of the ability to to launch permissionless prediction markets. Okay, well, prediction markets is a huge market that traditional investors are hearing about all the time, every single day. They turn on CNBC, it's sponsored by Kalshi. They they see a Wall Street Journal piece on prediction market on Polymarket, etc.

And so, you start to talk about all these mega trends of stablecoins, tokenization, prediction markets. You talk about the infrastructure it's going to be on and Hyperliquid is just at the top of that conversation every single time. And I think that's that's how the educational journey starts and when you paint that picture for them, it makes it much easier to make an allocation because you actually have tangible points to reference not only on regulation, institutional adoption, but on the fees that Hyperliquid is already generating before this transition takes place. And I think I think the nail in the coffin there on the on the conversation point with these investors is it's not just crypto assets.

>> Yeah. >> The Wall Street Journal, Bloomberg, other major financial publications are quoting the price of oil that trades on Hyperliquid on the weekends, right? The S&P 500 just licensed its index to trade perpetual futures on Hyperliquid that trade 24/7 365. So, you can actually see this playing out in real-time if you're an investor. They're paying attention to so many other things in the world. Our job is to show them this is happening and help them understand how to get exposure to it. >> Okay, so that's super bullish and I you know, trust me, I've been I was buying Hyperliquid the first day. I am beyond elated [clears throat] at this conversation, but like what are we missing here? Is there a regulatory risk? Is there a competition risk? Is there a DeFi exploit risk? Is there a

security risk? What are what are the what what does that conversation look like when it comes to Ryan, this sounds amazing. I mean, look this thing is printing money. It's still kind of under known under allocated even within the crypto native landscape. There's a lot of people that are sidelined because they just thought it was another perp decks too expensive whatever let alone the rest of the macro environment global macro. What am I missing here? Why is this why is this not so obvious? >> So yes, there are risks and we talk about those and you brought up some really really good ones that investors should know about and that we educate on regulatory risk continues to be one of the larger risks facing Chris crypto.

It's been de-risked significantly with the current administration. But there's reasons that the clarity act are so important for instance and why we need the SEC to finalize its project crypto agenda. And push those things through is because you need this stuff set in stone in order for the next administration to not come and easily reverse it or you need it set in stone so that traditional institutions actually feel comfortable. Allocating billions of dollars investing tens or hundreds of millions of dollars in this infrastructure for the long term. You've already started to see this play out for instance with stable coins post genius act. We've seen so many traditional institutions start investing a lot of money in stable coins or you've seen so far just launch a stable coin

for its I think 15 million users of its app right and you've seen time and time again developments in the stable coin front MasterCard spending over a billion dollars stripe spending over a billion dollars on. Stable coin infrastructure acquisitions. They only did that after the genius act passed because they were comfortable that there is now legislation in place that's not just easy for the next administration to reverse with an executive order for you know a new SEC to come and reverse. Okay, so when it comes to hyper liquid the natural question is are assets going to move on chain are traditional institutions actually going to be interacting with these blockchains and how are they going to do it and what's the DFI privacy issue looking like what about KYC AML There's all these questions. And so you need legislation in place in order for

these institutions to feel comfortable knowing the rules of the road and to actually invest and move to take these steps forward. So the regulatory risk is there, but we need to get legislation in place to de- de-risk it even further. That's like the first risk out there and I don't think that the Clarity Act, if it doesn't pass in the next 7 weeks or 8 weeks before the summer recess, that's not the end-all be-all, right? There'll be chances to pass in the future, but we really would love to see it pass of course uh in the next 2 months before the midterms before the summer recess. Okay, another risk, you mentioned this as well, there's smart contract risk, right? There is technical risk associated with moving your business onto this new technology, right? These blockchains. They ask about quantum risk when we talk about investors and when we

talk to institutions about moving on chain, right? Those are real risks, too, and so we help them understand those risks. And and then there is competition risk. I mean, you you said that as well and I think that's very, very true, right? We've seen time and time again new L1s disrupt the existing L1 space. >> Especially in perp dexes. >> Especially in perp dexes. There's just consistent iteration. >> Right, people are talking about already that oh, there's hyper liquid uh uh disruptors, right? Lyra, etc. And so you saw Solana disrupt Ethereum. You've seen hyper liquid kind of disrupt Solana, right? And so there's some competition risk. Now this is why when we talk to investors, we talk a lot about position sizing, right? Don't put all your eggs in one basket. Most traditional investors wouldn't do that in the equities world. They wouldn't do

that in the alternative assets world and so they shouldn't do that in the crypto world. We're big fans at Bitwise of indexing or buying a basket of crypto assets to play a specific theme. So okay, you want to invest in the growth of stable coins. You want to invest in tokenization, every asset in the world being tokenized. You should buy a a basket that represents that theme and we're happy to help them build those baskets or run model portfolios for them. We have index funds as well that do that for them, but a lot of investors want to take those positions and add satellite uh positions on top of that.

Maybe they're Maybe they want broad exposure, but they want to be oversized or overweight hyperliquid. Then, they'll add a hyperliquid ETF on top of that. And, we help mold the way they're thinking about and, you know, educate on the way they're thinking about how to build a comprehensive crypto portfolio. So, it's risks, it's rewards, it's about having broad exposure, but also making sure you're exposed to the right themes and that you're going about it in a smart way. >> Amazing. So, just this week we saw the hyperliquid strategies treasury company, ticker PER, came out and announced that they had a weekly update on their financials. They sold about a $120 million of their or they issued about $120

million of their of their own stock, sold it, raised a bunch of cash off that, I think $40 million of cash, bought about a 1 million hype, I believe, in the last week or so. And, so they raised their cash by about 40 million to about $150 million of cash now. And, they have, I think, 22 23 million hype under this this treasury company. One of the only treasury companies in the entire market that is like timed things somewhat well and also picked the right asset.

When it comes to the growth of the treasury companies in hyperliquid, specifically with PER, how does how does PER affect the investment thesis for hyperliquid as an asset? Obviously, they're just trying to continue to accumulate this thing. They're They're sitting at about 1.19x NAV. So, they are able to continue to hit that ATM to buy more hype. In your mind, is this kind of like negligible? Is it Is it important? How do you think about hyperliquid strategies contributing to continued growth of hype?

>> Yes. Well, love the ticker, by the way. It's just a It's a fun-sounding ticker. Uh it's not It's not legible. It is important. I think on for for one, it's a simple supply and demand story, right? You have more demand coming into an asset than there is new supply or supply issuance, then you're going to drive price up. That's just simple economics. And so, when you have the ETFs buying hype on the open market, when you have the Hyperliquid systematically buying hype on the open market and burning it via the fees generated from using the platform. And when then you have companies like Hyperliquid Strategies raising cash and using that to buy hype on the open market, all of those things are the demand side of the equation. And

when you stack those up against supply, that's when you can start to realize, "Okay, where's this thing going?" and you can explain why the price is has done so well over the past week, right? Beyond demand on hype itself, I think it's really important to have these companies in these spaces, whether it's, you know, Bitmain and Ethereum or whether it's Hyperliquid Strategies and Hyperliquid that are building around the space, right? Or or or uh you just had um Josh Loman, right? And they're also doing the same thing for >> the Yeah. >> You're championing adoption. You're investing in the infrastructure around the space. You're using the protocols, right? Like you're using DeFi. You're helping to uh boost liquidity and boost the brand name around these things, and you're buying the asset, and you're

holding it or you're staking it, etc. Like those are all important things. It also provides investors who maybe have mandates to only invest in public equities. It provides them a way to gain exposure to these new technologies and these crypto-native systems through public equities, right? So, we work with for instance, endowments, foundations, etc. Some endowments or some foundations have mandates that they cannot invest in commodities. Like they simply cannot invest in commodities or single-asset commodities, right? They can't buy a gold ETF. They can't buy a Bitcoin ETF. They can't buy a Hyperliquid ETF. They certainly can't invest in crypto assets directly because of operational nuances, etc. But what they can do because they're allowed they they are policies enable them to invest in public equities

and because operationally they're set up to invest in public equities, they can go buy a hyper liquid strategies company, right? And they can have that exposure and then any alpha hyper liquid strategies can generate on top of the underlying price exposure to hyper liquid is a plus for those investors, right? And so I think it's really important to have these companies in the ecosystem, bring awareness, bring demand, and and bring liquidity into the into the ecosystems. And so I'd love to see what hyper liquid strategies is doing and if I had to guess we're going to see more hyper liquid dots pop up.

>> Amazing and I agree. I mean they've executed quite well from a top-down perspective. Have done well. I've, you know, a good sized bag in perp and been very very bullish on shims. I always have to do a disclosure here. And and so when we're thinking about some some of the circumstances of events that have happened and kind of like the order. One of the things that happened like about a month ago was this circle coinbase USDC deal with hyper liquid which is another demand driver that would that we haven't quite touched on yet. One of the things that we heard from the leading liquid staking provider kinetic on the on the hyper core and hyper EVM team was hyper liquid does not pay for anything externally. Market

makers, they don't pay for integrations, they don't pay for all any of this stuff that a typical kind of L1 would. And in some sense that slowed them down. They've, you know, it's been harder to to do certain things. It's been harder to get certain things done. But they have these different teams now. The trade XYZ team has kind of came in as its own external team but part of the team, Jake Chervinsky in DC has now kind of stepped into his own kind of team. And so you got all these little like teams within the team. But of course, you know, the claim to fame the claim to fame is like 11 12 people on the team. Now, with that being said, this Coinbase and Circle deal was specifically unique because in most cases Circle and Coinbase like to strike deals where the

revenue split is heavily favored to them for the liquidity, for the native issuance, for all of the Lindy effect that these companies bring. In Hyperliquid's case, it's actually quite the opposite. Most of the revenue, I think to the extent of like 90-something plus percent of the USDC that is built 5 and 1/2 billion now, I think on Hyperliquid on Hypercore, will actually be given to the assistance fund and used for buybacks. How How did this specific event change your view on the regulatory risk, on the revenue risk, on kind of Hyperliquid's dominance?

What did you think after this happened? >> Like there are certain moments in a journey of a let's just call it even though it's not a company cuz it's an easy you know, it's an easy mental model to use. There's certain elements or certain events that happen where you're like, "Oh, okay, this is like it's happening now." Like this is a step change in how their business operates. They've shown that they are powerful in this ecosystem, that their brand name holds a lot of value. And I think this was a moment where you saw that happen. I mean, I think you're absolutely right. Typically, you don't see these types of deals where the the issuers, whether it's Circle or Coinbase, whether it's the distributor, have less economic capture of the deal, right? But in Hyperliquid's case, to your point, this just grew their revenue significantly.

But I think it also bolsters adoption of USDC, right? And that's why you would see Coinbase, who hasn't sent it to do that, and Circle, who hasn't sent it to do that, want to do this deal, right? They want to grow USDC into the world's largest regulated stablecoin. And if you're looking at ecosystems like Hyperliquid, where tons of trading activity is happening, whether it's perps, now spot, prediction markets are headed that way, it makes sense to want to make your stablecoin the staple of that ecosystem, right? If they could have gone back in time and done that for Solana, they would have done that, right? And so I think that's the reason why they would do something like this.

Overall, it's going to drive a lot of demand into the USDC stablecoin. That will grow over time, more liquidity, more dominance across different blockchains, more supply, more revenue, etc. And so it makes sense for them to do it. It's a great boost for Hyperliquid, right? And and I think when you think about to your point of regulation, like where is this thing headed, the ability for Hyperliquid to say, "Look, we have the world's largest regulated onshore US-based stablecoin as like our, you know, preferred partner, if you will, for lack of a better term, and it's dominating what the stablecoin usage is on top of this platform. That's a great point to make to regulators when you're working with them or or showing them what your business looks like. So it's a win-win, in my opinion. Of course, it's a win for Hyperliquid, but I think it's a win for

Coinbase and Circle, as well. >> Yeah. Yeah, well, I think it contributes to this vision of being kind of like this house of all finance and being able to have that regulatory, you know, arm, right? With with these two players, it brings a lot of a lot of firepower in DC, and also a lot of credibility and legitimacy. And then perhaps up to the tune of 125, 150 million dollars of annualized revenue from the Treasury bills underlying the USDC on the blockchain. You know, that is rate dependent, but you know, that is another another nice boost to the assistance fund. When when you're looking at like the TAM here, right? People often compare Hyperliquid to Binance, Bybit, and these other exchanges, but then you've got like the larger view of the

NYSE, the CME, Nasdaq. And these guys are not going to go down easy, and they're not friendly opponents, right? Talk to us about how you see Hyperliquid's progression from like a crypto exchange to comparing to Binance. I think they hit like 17, 18% of OI on Hyperliquid comparatively to Binance, I believe. Don't quote me. But like, we're we're taking a much bigger swing here. Those guys aren't going to back down easy. What is your mental model for maybe how that could play out, what that comparable looks like, and that evolution?

>> Uh yeah, so so I think that the the TAM of what crypto's going after is insanely massive. It's literally measured in the tens of trillions, if not larger. And I think the the surface area that crypto has scratched is tiny, right? So, overall, the market for for that these these markets are going after is huge. The penetration of those markets is minimal. It's going to grow significantly over time. So, it's important, definitely, to look at Hyperliquid's share within what we already have as as the perps market, right? And you you reference the stat against Binance in terms of OI, and I think that's the right number uh as well, right? And that's impressive, cuz it's a relatively new system. Binance has been around for a very long time, and it's starting to build and hit all-time highs once over and over and

over again in terms of its share of that perps market. But, Hyperliquid's also growing its spot volume business, right? It's It's getting into prediction markets. It's probably going to launch other products, right? We're only at HIP 4. Who knows what HIP 5, HIP 6, HIP 7, HIP 20 brings, right? All of these things will help them address these other huge markets that crypto in general is going after. The reason why I I think it's important to think about the overall size of the market that crypto's going after is cuz you will see crypto's share of the market grow, and then Hyperliquid's share within the breakdown against Binance or other other firms also grow, and I think that's net positive for Hyperliquid. Look, we're so early in in the journey of these things.

There's a reason that you can have an ecosystem like Hyperliquid, which is relatively new compared to other blockchains and other L1s do so well and grow into the 10th largest crypto asset in a matter of years, cuz this is just such an early space. It's really hard to look 20 years out and say who the winners and who the losers are going to be. It's easy to say I think this company is going to be, or I think this ecosystem is going to be a winner. But, what we tell investors is that having broad exposure to the space is a safer bet than choosing individual winners or losers and that is true if you would have gone back and invested in the internet in the late 90s early 2000s right do you want Google or do you want pets.com you probably could have just bought a basket had both and you would

have done just fine. >> Yeah one of the questions that gets kind of thrown around with regards to this point here is what is the actual market cap of hype and there's like conflating numbers if you look at coin coin Gecko or if you ask somebody else when your investors are looking at the PDE ratio of this thing I think it maybe is around 50 you could say right now depending on the numbers what what is the like like what market cap numbers do you guys go off of or like what is the because there's this kind of issue right for the audience where there is these unlocks but effectively the unlocks are only to the team because there's no VCs and so we kind of have this trust in the

team that they're not going to unload on the market and so it and then you've got the assistance fund which is also like there's no rules around what can be done with that but but it's it's almost like Satoshi's wallet where it's never been touched and it will just only been added to and never been withdrawn from what is the right way to think about the the market cap structure from a circulating market cap and an FDV market cap for hyperliquid how do you explain this like situation to your investors? >> Yeah so so the things you noted are are really good things you talk about risks as opposed to your bull case and things that you use to level out your bull case so I think it's important to think about these things to be completely honest people who are buying the hyperliquid ETF if you're if you're a financial

advisor or you're an investor that that spends most of their time in tradfi you're not thinking about these these differences between like like FDV and float adjusted market cap etc like they're just not there yet they're not calculating PEs on hyperliquid they see this thing that is hitting escape velocity of course price help leads helps lead the narrative, and they want to have some exposure to these mega trends of stable coins, tokenization, prediction markets, etc. They're not really that focused on PEs today, right? They think, "Okay, these are huge markets that are going to grow over the next decade. Let me invest in them now like early-stage tech, right? Rather than uh you know, trying to figure out where does it fit, you know, amongst like the PE of the other S companies in the S&P 500."

>> like somewhat somewhat price insensitive investors at this current point. >> Yeah, I mean, institutional investors, for the most part, are long-term oriented and they're systematic, right? They're They're of course those that are trying to trade in and out of these markets and stuff. But, when they think about making crypto allocations, they really are betting on crypto as a theme, crypto as a trend. It's a small portion of their portfolio. They don't really have time to get into the nuances of like FDV versus like circulating supply and unlocks. It's just not something they think about. Their thought process is "Am I hearing that every asset in the world is going to be tokenized? Am I hearing that Wall Street Journal Bloomberg is quoting the price of oil and that the S&P 500 just licensed an index for Hyperliquid, etc.? Yes. Okay, great. Where is it all happening? Oh,

it's happening on Hyperliquid right now. Great. I should probably have some exposure to that in case these things are true. I should minimize the impact on my portfolio if they're not true, and that's why they balance their their position sizing. And it's not 50% of their portfolio. It's not 20% of their portfolio. In most cases, when we talk to investors, crypto is anywhere [snorts] from 2 to 5% of their portfolio, and they split that across many different crypto assets. Now, of course, there are investors, uh financial advisors wealth managers who have zero crypto, and there are some that have 10 or 15 or 20% crypto. But, most of it balances in like the 2 to 5% range, and it's split across several different crypto assets, and they just want broad exposure to these mega trends, and Hyperliquid is one of the things that gives them broad exposure,

but there are many other things as well. >> That is extremely extremely bullish. >> Yeah. >> That is extremely bullish. So, just to kind of close this out here, is is your is your take here that then Hype as an asset it to be undervalued currently and that there's a price appreciation that is, you know, yet to be had. Directionally, like how do you how do you reconcile all of this into a directional thesis? >> Yeah. So, there's a lot of crypto assets out there and for most of crypto's history, it's been difficult to align the the growth of this ecosystem with the value that's passed on to token holders. Hyperliquid is one of those new newer crypto assets in this kind of post-Gensler, post-Biden

regulatory world that's figured out how to do that in a remarkable way. So, yes, do I think if we're correct that every asset in the world's going to be tokenized that stablecoins are going to go to three, five plus trillion dollars in the next five years. Uh if you think that capital markets in general are going to be risk-on, then yes, I think there's room for Hyperliquid to grow. Its share of the market's going to grow and the market in total is going to grow. Those are both kind of bullish tailwinds, right? We believe the regulatory environment is going to be more supportive of crypto than less supportive of crypto going forward. That bodes well for Hyperliquid and other crypto assets. Yes, incumbents are going to fight it, but I think that happens with all new technologies and when you have an innovative technology like

crypto, like blockchains, like Hyperliquid, those fight through those break through kind of the walls that incumbents and regulators put up. We've seen it happen time and time again. It's not new to crypto. It's not going to stop crypto. And so, I think that escape velocity to us is going to happen and just making sure that you have exposure to these megatrends is what we tell investors that they want to have cuz you don't want everyone to have been saying that these things are going to happen and then have to look your client in the eye five years from now when stablecoins are five trillion or when, you know, tokenized assets are 10 trillion and say, "Oh, yeah, I heard about that, but I decided I didn't want to have exposure to that."

>> Yeah. Wow. I mean, guys, I mean, we have some of the largest allocators in the world buying buying what we've been preaching for over a year here. Ryan, thank you for your time. Thanks for joining us. Congratulations on the successful launch. >> Yep, great to be here in the tokenization tower. Would love to come back sometime. >> Thanks to Bitwise. Thanks to 21Shares for bringing this asset into the institutional allocators hands.