Analyst Warns Against Investing in Hyperliquid Right Now: Here’s Why

Michael Nadeau, the founder of The DeFi Report, expresses a cautious outlook on Hyperliquid's token, HYPE. Although he believes in its long-term potential, recent market movements and data indicate that now may not be the best time to invest in HYPE.

Key Takeaways

Michael Nadeau supports Hyperliquid's long-term vision but cautions against buying HYPE at the moment.
Recent metrics show a decline in key performance indicators such as trading fees, volumes, and open interest.
The “TradFi/Oil futures” narrative has drawn attention, but current data does not support this bullish perspective.
Nadeau emphasizes that despite HYPE's 93% increase since January, the short-term market setup is less favorable for new investors.

Hyperliquid HYPE

Analysis: Hyperliquid's Current Position

Michael Nadeau, founder of The DeFi Report, remains optimistic about Hyperliquid in the long run but believes that the recent surge in HYPE may not align with current market data. In a post on X, he pointed out that the market has been overly enthusiastic, just as on-chain activity and position metrics begin to decline.

Nadeau clarifies that Hyperliquid isn't ineffective; rather, the recent bullish trend of HYPE might have outpaced what the underlying data indicates. He appreciates both @Globalflows and HYPE but suggests they are ahead of the curve. "HYPE has performed well during the bear market, outperforming BTC, thanks to its token economics and the narrative surrounding TradFi and oil futures," he noted. However, he argues that Hyperliquid resembles a "risk-off" chain, similar to the broader crypto market.

Long-Term Optimism, but Caution Now

This distinction is crucial. Hyperliquid is billed as a high-performance layer-1 blockchain designed for an entirely on-chain financial ecosystem, featuring on-chain order books for both perpetuals and spot markets. Supporters have highlighted HYPE's unique design: the platform allocates trading fees to the community, converts those fees into HYPE tokens, and burns some of these tokens, offering discounts for stakers. This is what Nadeau refers to when he mentions HYPE's appealing "token economics."

He also touches on the "TradFi/Oil futures" story, which has gained traction in recent weeks. Hyperliquid claims it can integrate crypto’s 24/7 market structure with traditional assets, and the oil-linked perpetuals on the platform received heightened interest during geopolitical tensions involving Iran, with traders using it to price crude oil outside standard exchange hours. This scenario has contributed to the idea that Hyperliquid could become a real-time trading hub, rather than just another blockchain.

However, Nadeau argues that current metrics contradict this bullish narrative. "Fees have decreased by 56%. Trading volume is down 55%. Open interest has fallen by 44%. Bridged assets are down by 32%," he stated, adding that there have been "very few inflows in the last 30 days." These statistics are significant—they reflect actual trading activity, how much derivatives exposure remains, and the volume of capital entering the network.

Nadeau sharpened his critique by noting, "It's the same 50,000 users on HYPE that we saw last year." This observation highlights a key concern: while prices may be driven by optimistic narratives, user growth and incoming capital appear stagnant.

Market Structure Considerations

Shifting from fundamentals to market mechanics, Nadeau pointed out that oil futures trading volume on Hyperliquid peaked on March 9 and has since declined, undermining one of the main catalysts for the recent price increase. Additionally, he argues that HYPE is currently "locally overbought," citing a Relative Strength Index (RSI) of 67. He also noted that HYPE is facing resistance at its 50-week moving average, a significant trend line for many chart analysts.

His skepticism extends to PURR, the token now traded on Nasdaq as Hyperliquid Strategies Inc. This vehicle positions itself as a digital-asset treasury aimed at acquiring HYPE and providing institutional investors exposure to the token. Nadeau described purchasing it during a "risk-off bear market" as puzzling, especially because he believes there is minimal evidence that traditional finance is eagerly seeking exposure to HYPE. He pointed out that HYPE has risen 93% since January 20, while PURR has increased by 87% during the same time frame.

Overall, Nadeau’s message is a measured caution rather than outright pessimism. He remains "bullish long term," but for now, he is advising against following the recent market action. For traders, the key takeaway is this: while the long-term outlook for Hyperliquid may still be promising, the short-term situation does not present an attractive entry point for new investors.

At the time of writing, HYPE is priced at $41.031.

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