- 0xResearch
- Posts
- Speed Has Value
Happy Monday!
BTC led the major benchmarks lower as ETF outflows and Strategy-related pressure weighed on sentiment. At the same time, lending moved in the opposite direction, with Aave standing out as the market started to price its role in tokenized securities, institutional collateral markets, and onchain securities finance.
That same theme, crypto protocols monetizing more specific forms of financial utility, shows up in Hyperliquid as well. Its priority-fee market turns latency competition into a protocol-level revenue stream, allowing HyperCore to capture some of the value that previously accrued mainly to the fastest market makers and HFTs.
Markets slipped back into risk-off mode last week, with all four major benchmarks ending lower. The Nasdaq and S&P 500 fell -3.20% and -1.31%, respectively, while gold declined 3.31%. BTC was the weakest performer, dropping -6.74% on the week after briefly touching $58K. The asset is now down -31.9% YTD, making it the worst-performing major benchmark by a wide margin.
The weakness in equities was once again centered around the AI trade. While Micron briefly lifted sentiment after reporting strong earnings and guiding for $50B of revenue next quarter, well ahead of the $43.6B consensus, optimism faded after Apple announced price increases across its product lineup to offset higher chip costs. The move reignited concerns that rising AI infrastructure costs could eventually weigh on consumer demand while also adding to broader inflation pressures.
BTC also faced several crypto-specific headwinds. Michael Saylor's STRC preferred shares fell 16.5% last week and now trade at roughly $76, well below their $100 par value. The discount reflects growing skepticism over the sustainability of STRC's dividend and has fueled speculation that additional BTC sales may be required to support the structure. At the same time, spot BTC ETFs recorded another $1.45B of net outflows, continuing the persistent institutional selling pressure seen over recent weeks.
Despite the weak backdrop, one corner of crypto stood out. The lending sector gained an impressive 21% on the week, driven largely by Aave, which rose 10% and represents roughly a quarter of the index.
Aave appears to be benefiting from the growing tokenized equities narrative. Its V4 hub-and-spoke architecture is well suited for tokenized securities, allowing them to be used as collateral across lending, repo and securities lending markets. Combined with Aave's deep liquidity and the early traction of Horizon among institutional RWA users, the market is potentially viewing Aave as one of the beneficiaries as tokenized equities move onchain.
Looking ahead, Thursday's Nonfarm Payrolls report will be the key macro event to watch. Following the Fed's hawkish tone at its latest meeting, another strong labor market reading could further dampen hopes for rate cuts and keep pressure on risk assets.
— Kunal
Hyperliquid’s Priority Fees
General-purpose L1s sequence transactions through a generic priority-fee market: traders bid for execution priority with explicit fees, and validators can extract MEV through their control over ordering.
HyperCore works differently because the order book is part of the protocol state. Instead of routing every transaction through a single fee-priority queue, it applies semantic ordering rules keyed to how each action affects the book. Passive updates and cancellations are sequenced ahead of immediately executable flow, so the book always reflects the latest resting liquidity and removed orders before any taker order is allowed to consume it.
That settles how aggressive orders rank against passive ones, but it leaves a second question: how do aggressive orders rank against each other? If two IOC orders are trying to take the same resting liquidity, whichever reaches the book first gets the better fill.
Historically, this competition was resolved by latency. Traders spent heavily on infrastructure, colocation, specialized networking, local order-book construction, and optimized routing, all to shrink the time between observing market state and submitting an order.
Write priority fees replace that with an explicit sequencing market for eligible aggressive flow. Hyperliquid doesn't make an order physically arrive faster; it adjusts the order's effective ordering time inside the block. Empirically, each 1 bp of priority fee currently improves that effective time by roughly 45 ms, up to an 8 bp cap. By paying for priority, a trader can offset some of a raw latency disadvantage, letting a later-arriving IOC order be processed ahead of an earlier, lower-fee one.
Beyond standardizing latency competition, priority fees are interesting because they create a new, variable form of value capture. For an exchange, the core business is monetizing access to flow: matching buyers and sellers and charging a base fee on volume. But not all volume is equal. Some flow is far more valuable because it interacts with temporary inefficiencies in the order book that HFTs and market makers compete to capture, stale resting quotes after an external price move, liquidation flow, or cross-venue dislocations.
Base fees monetize matched volume broadly; priority fees monetize the narrower subset of flow where ordering carries incremental economic value. In effect, they are a variable payment from market makers and HFTs for access to the most valuable opportunities the order book creates. In competitive situations, traders are forced to share part of the expected return from those opportunities with the protocol: the highest bidder receives better sequencing and is more likely to reach the liquidity first.
Consider a concrete case. If stock XYZ reports strong earnings and its reference price jumps from $100 to $105, some resting asks on HyperCore may still sit below fair value. HyperCore first gives market makers a chance to cancel those stale quotes, but whatever liquidity is left behind becomes a target for HFTs. Previously, the fastest infrastructure would capture this arb while Hyperliquid earned only base fees. Now traders must bid for sequencing priority, up to the 8 bp cap, forcing part of the expected edge back to the protocol.
This should matter most in less mature or more illiquid markets such as HIP-3, where transient inefficiencies and stale-liquidity opportunities tend to be larger. It also strengthens the monetization case for HIP-3 specifically. Even with open questions around moving markets out of Growth Mode (the standard HIP-3 fee tier) and around the deployer/protocol split, priority fees add a separate, variable revenue stream tied directly to the value of immediacy.
Priority fees have been live on mainnet in alpha mode since April 13, 2026. Usage was initially limited to HIP-3 markets, but the mechanism has since expanded, with the most recent update extending write priority fees to non-HIP-3 markets as well. Since launch, they have generated $2.73M: $1.41M from write/order priority fees and $1.32M from read/gossip priority fees.
— Shaunda
Blockworks Research argues that EtherFi has successfully evolved from a staking protocol into an onchain neobank, with Cash now generating the majority of protocol revenue even after excluding cashback-related accounting. The report highlights strong growth in card spend, payments revenue, and global user adoption, while noting that lending remains a small but important long-term opportunity as the business matures. Although buybacks are currently paused, ETHFI's token unlock overhang is largely behind it, leaving an updated value accrual framework as the key catalyst for a potential rerating.
The article argues that Aave V4 could extend beyond crypto lending into the multi-trillion-dollar securities finance market by using its hub-and-spoke architecture to support securities-backed lending, repo, and securities lending onchain. The report contends that tokenized assets, shared liquidity, atomic settlement, and transparent collateral management can reduce costs, improve capital efficiency, and replace many intermediary functions that dominate traditional market structure today. As tokenized RWAs continue to grow, it sees Aave V4 as well positioned to become a core piece of institutional financial infrastructure rather than just a DeFi lending protocol.
