JPMorgan says Hyperliquid faces growing competition while HYPE ETF inflows stall

Hyperliquid's market share could come under pressure as regulated U.S. platforms expand and competition in prediction markets remains intense, according to JPMorgan analysts. Meanwhile, inflows in Hyperliquid exchange-traded funds have stalled.

"We see significant challenges to the market share of decentralized platforms such as Hyperliquid," JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a report. "Whether Hyperliquid eventually surpasses in market cap other tokens such as Solana and XRP remains to be seen."

The first challenge is increasing competition from U.S.-regulated crypto perpetual futures trading platforms, while decentralized platforms face concerns over unlicensed derivatives activity, limited know-your-customer/anti-money-laundering controls, manipulation, attacks, oracle failures, and weaker consumer-protection safeguards, the analysts said.

"The launch of U.S.-regulated crypto perpetual futures products could accelerate a shift in liquidity away from offshore and decentralized venues to onshore venues," the analysts wrote.

Secondly, competition from existing and new entrants in prediction markets remains intense while Hyperliquid is expanding into prediction-style markets to attract more activity on its platform. Hyperliquid launched "Outcomes," prediction market-style contracts, in May, after testing the product earlier this year.

The value of Hyperliquid (HYPE) is closely linked to activity on its platform, particularly the fees generated from its main product, perpetual futures trading, the JPMorgan analysts said.

HYPE ETF inflows stall

The above challenges are likely one reason the flows into Hyperliquid ETFs have cooled in July and August to date, the analysts said, after they recorded the largest inflows in May and June as a percentage of their assets under management.

The trend in Hyperliquid ETFs differs from the wider crypto ETF market. Crypto ETFs recorded heavy outflows in May and June before returning to small inflows in July and August to date. Bitcoin and ether account for most crypto ETF assets under management, with about $77 billion and $10 billion, respectively. Other crypto ETFs hold between $2 billion and $3 billion, mainly in products linked to Solana, XRP and Hyperliquid, the analysts noted.

Interest in HYPE has also extended beyond ETFs. The token is the fourth-largest asset held in corporate crypto treasuries, behind bitcoin, ether and Solana, the analysts said, noting that HYPE's outlook remains dependent on ETF flows and trading activity.

"Tracking these ETF flows along with its market share in trading/prediction markets would be key to Hyperliquid's outlook going forward," the analysts concluded.