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The Company Behind the New York Stock Exchange Is Now Building on Hyperliquid. Here's What It Means for Investors.
Key Points
Intercontinental Exchange plans to create a new derivatives exchange using Hyperliquid's infrastructure.
Hyperliquid could gain a lot of new activity that generates fee revenue as a result.
Hyperliquid has a similar deal with the owner of a major crypto exchange.
The company behind the New York Stock Exchange (NYSE), Intercontinental Exchange (NYSE: ICE), will launch a new market for perpetual futures built on Hyperliquid (CRYPTO: HYPE), per an announcement on Oct. 29. While no launch dates have yet been set, and financial regulators still need to give the go-ahead, this marks a tremendous victory for Hyperliquid and its bid to become integrated with the traditional financial system, which may explain why the coin was up 18% during the prior seven days.
That might prove to be just an appetizer. Here's what this huge new development means for investors.
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TradeXYZ already runs 97% of Hyperliquid's third-party markets
Per the deal, ICE will operate a new, regulated U.S. market for perpetual futures contracts, built on Hyperliquid's blockchain and developed by TradeXYZ, a company closely linked to Hyperliquid. ICE will also take a minority stake in TradeXYZ, pending the necessary regulatory approvals.
Taken together, this means that ICE's new derivatives exchange is going to be one more vehicle by which Hyperliquid gets exposure to the growth of the perpetual futures market in the U.S.
Perpetual futures, or perps, are Hyperliquid's bread and butter for generating revenue, and they're essentially derivative contracts that track an asset's price and never expire. They resemble ordinary futures contracts and usually involve leverage. During the 30-day period ended Oct. 30, about $217.2 billion in perpetuals changed hands on Hyperliquid's exchange, generating $64.1 million in revenue.
As a business, TradeXYZ only operates on Hyperliquid and offers perps on stocks, indexes, commodities, and even other currencies. To do that, it launches its perps markets through HIP-3, a Hyperliquid feature that lets anyone who stakes 500,000 HYPE coins (about $46.5 million as of Oct. 30) deploy their own markets. TradeXYZ currently holds 97% of the $4.1 billion in open interest (the value of contracts outstanding) across Hyperliquid's third-party markets, so it's a dominant player in its niche.
In terms of economics, perps market developers like TradeXYZ are entitled to keep 50% of the transaction fees generated by their markets on Hyperliquid's network. And Hyperliquid funnels all but a couple of percentage points of those fees into making open-market purchases of its own coin, much like an automatic stock buyback.
In other words, if this deal enables ICE to launch many new, deep perps markets for its own users, it will be extremely positive for Hyperliquid as long as that U.S. activity continues to pay fees into Hyperliquid's system. Thus, it's almost certain that U.S. activity will feed Hyperliquid's fees and buybacks even with half the fee income going to TradeXYZ.
The ICE deal is just the latest
ICE isn't the only regulated venue operator lining up to use Hyperliquid.
Payward, the parent company of the Kraken crypto exchange, said on Sept. 16 that it intends to offer its U.S. clients perps using Hyperliquid's HIP-3 builder markets, starting with markets run by its Commodity Futures Trading Commission-regulated exchange, Bitnomial.
Moreover, having two separate regulated routes into the U.S. perpetuals markets raises Hyperliquid's odds that at least one will be approved. Of course, its competitors are also doing their best to get approved in the U.S., so it's important to remember that the perpetuals market will remain contested even if Hyperliquid manages to enter it.
Overall, this development indicates that Hyperliquid is well positioned to continue growing and that it's a platform serious enough to attract major players to use its backend for their own activities. And, as third-party market deployers fund their own markets, Hyperliquid doesn't even need to make significant capital investments to keep expanding.
If that's not bullish, not much else is.
Alex Carchidi has positions in Hyperliquid. The Motley Fool has positions in and recommends Hyperliquid. The Motley Fool recommends Intercontinental Exchange. The Motley Fool has a disclosure policy.