Hyperliquid, a decentralized derivatives exchange, has achieved an astonishing Fully Diluted Valuation (FDV) of nearly $15 billion without launching on any centralized exchanges (CEXs). This remarkable feat has made it one of the most talked-about projects this year. Alexon, the CIO of Ferryboat Research, shared his thoughts in a video recap about why he chose to pass on Hyperliquid despite recognizing its potential early on. His decision stemmed from overemphasizing decentralization and failing to fully investigate internal dynamics.

The video also delves into Hyperliquid’s core strategies, attributing its success to an efficient marketing approach that leveraged airdrops and high-profile partnerships to maximize attention. Alexon analyzes Hyperliquid’s inflow of capital, its pricing power concentration, and its exit strategies, offering valuable insights for the operational strategies of on-chain projects. This isn’t just a post-mortem of a missed opportunity but a deeper exploration of the ingredients for success in the blockchain ecosystem.

Follow Alex:

● Twitter: [https://x.com/0xAlexon](https://x.com/0xAlexon)

● YouTube: [https://www.youtube.com/channel/UCnX1MFimEgZ0_JRP5QBNU7g](https://www.youtube.com/channel/UCnX1MFimEgZ0_JRP5QBNU7g)

Introduction

Welcome to episode 136 of Alex’s Crypto Journal. Yesterday, I reflected on a question that I believe has significant value and is worth documenting.

The question is: Why did we fail to capitalize on Hyperliquid despite identifying it early on, ultimately missing one of this year’s biggest opportunities? Was it just an “airdrop” we didn’t claim, or was it more like passing on a seemingly obvious way to profit?

Why did we not act even though we spotted it in advance? Several factors contributed to this decision. Will I make the same mistake if a similar situation arises in the future?

Today’s discussion is structured into three parts:

1. Reviewing the decision: If given a second chance, would I miss out again?

2. Reflecting on errors: If mistakes were made, where did we go wrong?

3. Analyzing Hyperliquid’s success: What propelled it to such heights, and if I were managing Hyperliquid, how would I plan an exit strategy?

Statement of Opinion

I am aware that some friends from Hyperliquid might be watching this video, so I want to clarify that my views are entirely personal and carry no malice. I genuinely hope for your continued success, but I believe certain aspects of the design lean toward centralization. I hope this discussion offers insights to everyone watching.

Let me reiterate: I have nothing but best wishes for the Hyperliquid team because I strongly desire to see DeFi achieve true prominence. My opinions reflect only my personal perspective, with no ulterior motives. That said, let’s dive in. Crypto is a high-volatility, high-risk space with strong financial characteristics. You might strike gold — or lose your entire investment. Be prepared.

Now, let’s begin.

Part 1: If Time Rewound, Would I Still Miss Out?

Let’s address the first question: If I could go back in time, would I still miss the opportunity with Hyperliquid? Honestly, I’ve thought about this, and my answer is that I most likely would.

Looking back, I first published an article on Hyperliquid on August 6, roughly after encountering the project in late July. If you revisit what I wrote at the time, you’ll see the reasons for missing it were quite clear: I viewed its nodes and bridges as centralized. My focus was on high-performance public chains, and my preference was to exclude entirely centralized solutions. To me, even though Hyperliquid has now reached a valuation of $10 billion, this doesn’t alter my initial perspective. This was my judgment at the time — not a critique of the project.

That said, I acknowledge my mistake. The real question is whether one must accept some degree of centralization. For instance, in the early days, many were hesitant about the centralized design of Sequencers. However, with the rise of Layer 2s, centralization seems to have gained broader market acceptance. Yet from our team’s standpoint, we chose not to embrace this model.

So, even if I could do it over, I would likely make the same decision to pass on Hyperliquid for this reason. We conducted thorough research on it but ultimately decided against moving forward.

Part 2: Where Did We Go Wrong?

Mistake 1: Comparing Against the Wrong Benchmarks

This brings us to the second question: Where exactly did we make mistakes? The market is always right, and as individuals, we can be wrong. Just because we didn’t profit from this opportunity doesn’t mean we were correct. We need to reflect on where the errors truly occurred.

I believe there were two main issues. The first was choosing the wrong benchmarks. At the time, my focus was on high-performance public chains such as Monad, MegaETH, Sui, and Hyperliquid. I paid special attention to projects featuring on-chain order books, which included Hyperliquid.

Among these projects, Hyperliquid adopted the simplest and most obvious approach: leveraging centralized nodes and bridges to achieve high performance. The model itself wasn’t particularly complex. However, my mistake was not realizing a critical point until its Token Generation Event (TGE) was imminent — or rather, a team member pointed it out during a review of related materials. They raised an intriguing question: Could Hyperliquid, in some ways, be more efficient than existing centralized exchanges (CEXs)?

This perspective was one we hadn’t considered before. I had benchmarked Hyperliquid against other high-performance projects within its category. However, from another perspective, Hyperliquid should have been compared with CEXs like OKX, Binance, Bitget, or Coinbase. From this angle, Hyperliquid might offer a slightly higher degree of decentralization or a smoother on-chain experience. Even if it wasn’t fully on-chain, the market at this stage may have needed a product like this.

Viewed this way, Hyperliquid’s degree of decentralization was indeed higher than Binance or other CEXs. If that comparison had been clearer earlier, it might have altered my perspective. This was my first key mistake: benchmarking against the wrong category. In hindsight, my angle of analysis didn’t align with market realities.

Mistake 2: Failing to Investigate Internal Information

The second mistake was not actively investigating internal information. What do I mean by this? At the time, I had noted something peculiar and even mentioned it in my analysis. Hyperliquid’s Total Value Locked (TVL) was $700 million, with $500 million of that being USDC. This raised a question: Where did this $500 million come from?

I found the figure strange but didn’t pursue it further due to the lack of public information. If this had been in the secondary market, I would have dug deeper to uncover who was accumulating. However, with Hyperliquid, I made a serious misstep. When I couldn’t find answers in public data, I didn’t take the next step of investigating through internal channels.

In truth, I had access to resources that could have helped me uncover this information. Yet, I failed to follow through and identify the source of the $500 million USDC. If I had done so, we might have acted sooner and even participated in the project.

Looking back, I knew nothing about the factions, players, or styles behind Hyperliquid. The only fact I had was the presence of $500 million on its balance sheet. It was obvious that such a sum couldn’t have come from ordinary users depositing funds. At that stage, having $500 million in cash on hand indicated significant backing. Yet my efforts to uncover this support were inadequate.

To summarize, my two main mistakes were:

1. Choosing the wrong benchmarks for comparison.

2. Failing to investigate internal information thoroughly.

Part 3: Hyperliquid’s Strategies and Key Takeaways

Airdrops and High-Profile Partnerships: The Marketing Playbook

Let’s analyze why Hyperliquid experienced such a sharp rise and what lessons we can learn from their journey. If I were managing the project, how would I plan an exit strategy?

To start, let’s examine the growth trajectory. Hyperliquid’s airdrop was executed cleanly, with a significant portion of tokens unlocked and distributed directly to the community. By some accounts, their airdrop allocation was exceptionally generous. A follower of this channel, known as “茶不思,” regularly messaged me about Hyperliquid back when few in the Chinese community were discussing it. He kept sharing updates and eventually made hundreds of thousands of dollars from Hyperliquid.

If he hasn’t sold yet, he might have crossed the million-dollar mark. I genuinely feel happy for him. Whether it’s speculation or investment, if what you’re tracking pays off, that’s worth celebrating. Personally, I’ve never received an airdrop worth over a million dollars, but we must understand why this happened.

From the perspective of a project operator, Hyperliquid’s strategy was to channel all its marketing budget directly into airdrops. This decision ensured that resources were concentrated on the most effective growth mechanisms. It’s a textbook example of a “go big or go home” strategy.

When discussing airdrops, people often frame them as “giving back to the community,” but the reality is more nuanced. Airdrops are fundamentally a customer acquisition strategy, akin to distribution channels in traditional business. Tokens are the product, and airdrops are the tool to attract users.

There are two common strategies for achieving virality:

1. Top-Down Approach (Leveraging Major Influencers):

This involves partnering with superstars or major influencers. For example, in China, brands collaborate with top-tier streamers like Viya, Li Jiaqi, or Luo Yonghao to quickly boost sales. Even if these collaborations are not immediately profitable, the resulting hype provides opportunities to refine marketing strategies and attract mid-tier influencers to amplify the effect. This method, often employed by large consumer goods companies like Procter & Gamble, enhances negotiation power and builds momentum.

2. Bottom-Up Approach (Grassroots Advocacy):

Instead of relying on “aircraft carriers” like major influencers, this strategy uses a fleet of smaller boats — key opinion leaders (KOLs) and key opinion consumers (KOCs). These individuals may have smaller but highly engaged audiences, which can lead to better conversion rates. The focus is on leveraging micro-influencers through small incentives or gifts, creating authentic interactions that drive organic growth.

In crypto, these approaches are increasingly common. Projects seek endorsements from influencers while also engaging micro-communities. Hyperliquid excelled by combining both strategies:

1. High-Profile Endorsements:

Hyperliquid secured endorsements from top-tier influencers, such as Ansem, well before its launch. This early alignment with major names underscored the project’s strong backing. Hyperliquid’s ability to attract these connections suggested robust financial and strategic resources.

2. Grassroots Outreach:

Simultaneously, Hyperliquid’s airdrops targeted grassroots participants. By avoiding mid-tier influencers entirely, the project saved costs on intermediary fees, such as exchange listing fees or promotional expenses, redirecting funds to areas with maximum impact.

This dual approach ensured that the influence of top-tier endorsements cascaded downwards, while the grassroots user base organically created momentum. Together, these strategies eliminated middle-layer inefficiencies and optimized the allocation of resources.

Airdrops are often misunderstood as mere “handouts,” but they’re much more sophisticated. True costs are incurred only when funds leave the system. If a project sets a price floor and engages in buybacks when necessary, net outflows remain minimal. Moreover, in favorable market conditions, this strategy can generate substantial goodwill and boost both brand equity and market dynamics.

By concentrating efforts on airdrops and top-tier partnerships, Hyperliquid avoided wasting funds on unnecessary expenditures and ensured that trading volume and pricing power remained centralized on its platform. This strategy not only reinforced the value of their Layer 1 network but also allowed them to maintain tight control over market pricing.

Hyperliquid’s marketing approach serves as a masterclass in resource efficiency. By focusing on high-impact airdrops and strategically partnering with top-tier influencers, it established a strong market presence while maintaining operational agility. For emerging projects, this case highlights the importance of resource concentration and strategic alignment to achieve lasting success.

How Would I Plan an Exit Strategy?

If I were designing Hyperliquid’s exit strategy, I would focus on gradually exiting through ecosystem projects. For example, launching a memecoin or other ecosystem initiatives could boost the overall valuation. At the same time, I would strategically reduce some liquidity at these elevated valuations while maintaining the primary token’s high price to ensure long-term ecosystem sustainability.

Another approach would be leveraging a distribution strategy by controlling pricing power and eventually expanding to other exchanges as the project matures. At that stage, the token or funding costs would drop significantly because the project’s valuation and trading volume would provide strong negotiating leverage. Regardless of activity on other exchanges, Hyperliquid could maintain the highest liquidity and pricing power on its platform.

The brilliance of this approach lies in utilizing the advantages of a centralized framework. For example, Hyperliquid’s core trading processes can operate on its own databases, significantly reducing operational costs. This setup avoids the high gas fees associated with traditional on-chain trading. These cost efficiencies provide Hyperliquid with a strong competitive edge, allowing it to sustain high market influence with minimal fees. Maintaining high trading volumes and FDV creates advantageous conditions for arbitrage across various dimensions.

From an exit perspective, the ideal strategy would involve gradually exiting liquidity through external exchanges rather than relying solely on its platform. At the same time, Hyperliquid could act as a market maker, earning substantial profits without needing a full exit.

Closing Remarks

Lastly, I recommend tuning into the WSH Podcast, which recently featured an interview with Hyperliquid’s CEO, Jeff. The episode offers valuable insights into the strategies and thought processes behind Hyperliquid. While our team may still choose not to participate directly in Hyperliquid, we will continue monitoring the project for its significant role in shaping the market and the broader industry.

That concludes today’s episode. If you enjoyed the discussion, don’t forget to subscribe to the channel, like, bookmark, and comment. Your engagement helps us grow. See you in the next episode — bye for now!

Follow us
Twitter: https://twitter.com/WuBlockchain
Telegram: https://t.me/wublockchainenglish