Markets continued to grind higher this week, with equities extending their rally even as crypto leadership narrowed into a handful of stronger narratives. 

HYPE remained one of the clearest standouts, but that growth is also creating a more interesting tension. HIP-3 has quickly become a meaningful part of Hyperliquid’s volume mix, yet the economics of becoming a deployer are increasingly concentrated. With the required 500,000 HYPE stake now worth roughly $32M, Growth Mode compressing fees, and many paid market listings still struggling to break even, the question is whether HIP-3 is becoming permissionless in theory but increasingly difficult to compete in practice.

Today, we look at whether HIP-3’s current design is beginning to entrench existing deployers, why TradeXYZ has pulled so far ahead, and whether a tiered staking model could improve long-tail market creation.

US markets are closed for the Memorial Day holiday. Over the last week, the Nasdaq and S&P 500 continued to grind higher, posting gains of 1.8% and 1.3%, respectively. The S&P 500 has now risen for eight consecutive weeks and is up nearly 18% since the initial sell-off following the start of the US-Iran conflict. Meanwhile, gold ended the week roughly flat, while BTC slipped -0.90%.

The strength in equities continues to be driven by easing geopolitical tensions and another robust earnings season. The AI trade in particular remains resilient. The semiconductor index SOX gained 3.2% on the week, led by Qualcomm, which surged 15%. Despite Nvidia ending the week down -6%, its Q1 results once again highlighted the strength of AI demand, with both revenue and profits coming in ahead of expectations.

Across crypto sectors, Perps and Privacy were the standout performers, up 37% and 14%, respectively.

The Perps sector was driven by HYPE and LIT, which gained 34% and 51% on the week. HYPE remains one of the strongest large-cap performers of the year, up 146%, while BTC is still down close to -11% over the same period.

Interestingly, this rally has come despite weekly trading volumes on Hyperliquid remaining relatively flat since November, suggesting the move is largely driven by multiple expansion rather than underlying growth. Much of the excitement has centered around HIP 3 markets, which allow select TradFi and pre-IPO assets to trade 24/7. Additional catalysts include Circle’s USDC integration with Hyperliquid and the launch of HYPE ETFs, which have already attracted $81M in inflows within just nine days of launch.

Privacy also continued to gain momentum, with ZEC and RAIL up 24% and 182% on the week, respectively. Onchain activity on Zcash has strengthened notably, with both weekly transfer volume and network REV trending higher as the privacy narrative regains traction.

Looking ahead, Thursday’s Core PCE release will be the key macro event to watch. Recent inflation data has continued to surprise to the upside, with markets now assigning close to 40% odds of a rate hike later this year.

— Kunal

HIP-3's Barrier Problem

Hyperliquid's HIP-3 has become one of the most important extensions of its exchange layer. By allowing third parties to launch exchanges and markets on top of HyperCore, Hyperliquid has outsourced new market creation, diversified its revenue base, and moved beyond a standalone perpetuals exchange toward an infrastructure layer. HIP-3 now accounts for roughly one-third of Hyperliquid's monthly perp volume, up from less than 2% in November.

To keep this process permissionless while still aligning incentives, HIP-3 deployers are required to stake 500,000 HYPE, which can be slashed if they act maliciously. However, with this stake now worth roughly $32M and Growth Mode fees reducing deployer revenues by 90%, is HIP-3's barrier to entry silently entrenching the existing deployers?

Even among existing deployers, HIP-3 economics are already highly concentrated. Using trailing 30-day revenue annualized against the 500,000 HYPE stake, TradeXYZ generates an implied APR of 74%, while every other tracked deployer remains below 5%. Newer deployers interested in launching markets are unlikely to be able to fund a new HIP-3 deployment on their own, and crowdsourcing is equally unattractive, as this APR comes at the risk of illiquidity (HYPE cannot be withdrawn), as seen with Ventuals.

In addition to the high staking requirement, deployers must pay auction costs to list new markets. Many of these paid listings remain unprofitable even for deployers that have already met the 500,000 HYPE stake requirement. Median break-even times vary sharply: Dreamcash and TradeXYZ sit at 103 and 159 days, respectively, while other deployers face much longer break-even horizons. 

As a result, paid market auctions peaked in January, but activity from established non-TradeXYZ deployers has fallen sharply since then;  non-TradeXYZ listings declined from 35 in January to just 2 in May month-to-date, suggesting that even deployers with the required stake are becoming more selective about launching new markets.

This dynamic suggests new deployers are unlikely to continue competing aggressively, while TradeXYZ is likely to keep dominating existing markets. More importantly, the high barriers make long-tail niche markets difficult to justify, since break-even depends on generating enough volume to recover both the auction cost and a meaningful return on the 500K HYPE stake.

One solution would be for Hyperliquid to tier HIP-3 exchanges rather than enforce a single absolute requirement. Deployers could begin with a lower stake (e.g., 100K HYPE) that permits a capped number of markets with capped open interest, allowing them to list markets and expand, rather than needing to secure the full stake upfront. Because open interest would be capped, the exchange would remain proportionally protected by the HYPE stake.

The opposing view is that this would weaken one of HYPE's demand sinks. But given the low number of new deployers and the fact that these deployers are largely crowdsourcing from existing holders rather than buying new supply to stake, a tiered structure could actually create more opportunities: more projects able to deploy HIP-3 markets and more avenues for stakers to distribute HYPE to deployers in pursuit of yield.

— Shaunda

1. Undercollateralized Lending

The report argues that undercollateralized onchain lending is evolving beyond traditional DeFi liquidation models, with Wildcat and 3Jane representing two very different approaches to unsecured credit infrastructure. Wildcat is positioned as borrower-specific bilateral credit infrastructure where lenders directly underwrite individual market makers or trading firms, while 3Jane is framed as a pooled credit system that relies on offchain underwriting models, tranche structures, and protocol-managed recoveries to scale unsecured lending. 

The analysis concludes that Wildcat currently looks like the more credible and usable live market because risks are isolated and easier to underwrite, whereas 3Jane remains more experimental and dependent on the performance of its underwriting engine, servicing stack, and collections process. 

2. Lighter: An Update For Those Too Busy To Pay Attention

Flip argues Lighter is quietly building through a brutal post-TGE drawdown — volumes and revenues are down ~90% from ATHs vs. Hyperliquid's ~60%, but new distribution via Telegram Wallet (45k users added since mid-April) and Insilico (which routed $175M day one, ~4x its Hyperliquid builder-code volume) should drive a multi-quarter bottom. He expects two monetization levers to kick in: maker pricing power as retail flow improves (0.5→0.8 bps take rate = ~50% revenue lift on flat volumes) and a 20–30% revenue share from integrated partners in 2H26. Supporting the bull case: pending CFTC licensing, founder Vlad on the CFTC's Innovation Advisory Committee, and a programmatic buyback that has retired >5% of circulating supply.