Analyst Indicates Hyperliquid Isn't a Good Buy Right Now: Here's Why

Michael Nadeau, the founder of The DeFi Report, acknowledges the long-term potential of Hyperliquid but cautions that the recent rise in HYPE seems to be premature. He notes that the current market conditions do not support the bullish trend seen recently.

Key Takeaways

Michael Nadeau believes in Hyperliquid's long-term potential but is skeptical about its current timing.
Significant indicators, such as trading fees, volumes, and open interest, are declining.
User engagement on Hyperliquid remains stagnant despite price increases.
The recent rise in HYPE may not be sustainable without genuine market support.
Nadeau warns that while Hyperliquid has promise, current conditions are not favorable for new investments.

Hyperliquid HYPE

Long-Term Optimism for Hyperliquid, But Caution is Advised

Nadeau’s distinction is crucial. Hyperliquid is marketed as a robust layer-1 solution designed for an entirely on-chain financial ecosystem, complete with on-chain order books for both perpetuals and spot markets. Supporters of HYPE have highlighted its unique design: the platform allocates trading fees back to the community and has a fund that converts fees into HYPE, subsequently burning those tokens. Additionally, stakers can benefit from discounts on trading fees. Thus, when Nadeau refers to "token economics," he points to the features that make HYPE appealing, even in turbulent market conditions.

Nadeau also references the "TradFi/Oil futures" narrative, which has gained traction in recent weeks. Hyperliquid positions itself as a way to bring a 24/7 trading model to more traditional assets. During recent geopolitical tensions surrounding Iran, oil-linked perpetuals on Hyperliquid drew considerable attention, allowing traders to price crude oil outside regular exchange hours. This led to the perception that Hyperliquid is evolving into a real-time macro trading platform, rather than merely another crypto chain.

However, Nadeau expresses skepticism as the data doesn't align with this optimistic narrative. He cites declines of 56% in fees, 55% in volumes, and 44% in open interest, alongside a 32% drop in bridged assets, stating there have been "very few inflows over the last 30 days." These figures are crucial since they indicate the level of trading activity, how much derivative exposure is active, and the capital flow onto the network.

He emphasizes that “the same 50,000 users on HYPE from last year are still the same,” which signals stagnation in user growth and capital inflows despite rising prices driven by market narratives.

Nadeau then transitions from discussing fundamentals to market structure. He notes that oil futures volume on Hyperliquid peaked on March 9 but has been declining since then, which undermines one of the main reasons for the recent price increase. Furthermore, he believes that HYPE is currently "locally overbought," pointing out an RSI of 67 and approaching resistance at its 50-week moving average—a technical indicator many traders watch closely.

His concerns also extend to PURR, which is now traded on Nasdaq as Hyperliquid Strategies Inc. This company aims to accumulate HYPE and provide traditional and institutional investors with access to the token. Nadeau questions the rationale behind investing in such a vehicle during a "risk-off bear market," particularly given the lack of substantial evidence that traditional finance is keenly pursuing HYPE.

Nadeau points out that HYPE has seen a growth of 93% since January 20, while PURR has increased by 87% in the same timeframe.

In conclusion, Nadeau provides a measured caution rather than a pessimistic outlook. He remains optimistic about Hyperliquid's potential in the long run but advises stepping back from current trading actions. For traders, this implies a succinct message: while the long-term outlook for Hyperliquid may still hold strong, the current market conditions do not present an appealing opportunity for entry.

As of the latest updates, HYPE is trading at $41.031.

Hyperliquid HYPE price HYPE targeting the 0.618 Fibonacci level on a 1-week chart | Source: HYPEUSDT on TradingView.com