$72.3 million in profit. That’s how much Hyperliquid saw in monthly trading volume during May, supposedly surpassing even the titans like TRON and Ethereum. Headlines bark chomping on “whale buildup” and a 6.9% price explosion in HYPE. Let’s hold off on the popping of that celebratory champagne cork, okay? As someone who’s seen enough market cycles to remember dial-up internet, I'm asking the tough questions: Is this a new era of DeFi dominance, or just another crypto shooting star destined to fade?

Where's the Real Money Coming From?

Hyperliquid’s success depends on knowing where its revenues will come from. Are these profits the result of robust trading activity, or have they been pumped up by something more ephemeral? Let’s face it, a lot of DeFi profit is still made on the backs of leveraged trading and speculation. If Hyperliquid’s profits rest mostly on such activities, a market correction will sting significantly. A quick change in sentiment could bring those numbers crashing down double-time before you could say “rug pull.” We need transparency. To understand the equity impacts of these new profits, we need to understand where these profits are coming from and who’s getting paid. We think the recent price and trading volume spikes, driven almost exclusively by a small number of whales, are suspect. Real organic growth, or a coordinated pump job? What’s the effect when those whales choose to cash out?

Think of it like this: a restaurant can have a wildly successful month because a celebrity chef makes a guest appearance. However, is that success sustainable if the food, service, and general experience are not always excellent? Now it’s Hyperliquid’s turn to show that its model is more than a flash in the pan hype machine.

Hyperliquid vs. DeFi: A True Contender?

Hyperliquid isn't operating in a vacuum. The DeFi space is a new, crowded arena with a lot of established players. So how does Hyperliquid compare to major players like Uniswap, dYdX and GMX? What unique advantages does it possess? What are its weaknesses? A high total value locked (TVL) of $1.59 billion seems impressive, but a high TVL is not a long-term winner maker. That said, we’re looking to see how Hyperliquid is innovating and clearly separating itself from the large player competition. Is it offering unique trading features? Is it attracting a loyal user base? Or is it just riding the wave of the GPT excitement?

Blockbuster dominated the video rental market, but it failed to adapt to the rise of streaming services. Now, Netflix reigns supreme. Hyperliquid must prove it can continue to adapt if it hopes to remain above the fray.

Regulation: The Elephant in the Room

The DeFi industry has been operating in a regulatory no-man’s land, and that situation is not sustainable. Once governments around the world begin legislating more regulation and crackdowns on crypto, Hyperliquid will be in deep waters. If the federal government were to enact stricter regulations, this would affect its operations, its profitability, and its ability to attract new users.

Consider the backlash against the SEC’s ICO enforcement spree in 2018. Perhaps most telling, many of those projects start off riding high only to swiftly crash and burn. To avoid regulatory backlash, Hyperliquid should take a proactive approach to regulatory risk and show intent to maintain their commitment to compliance.

The speculative Binance listing is a blessing and a curse. That would create a tremendous amount of painting. As a consequence, it places them in the crosshairs, leaving them more vulnerable to attacks.

The Human Factor & Tech Backbone

Just as we strongly believe that behind every successful platform is a team of talented and passionate individuals. Who are the people behind Hyperliquid? What's their experience? What's their vision for the future? As equally important, is their technology reliable and secure? A platform’s power lies in its individual parts. A security breach or technological failure could be a complete catastrophe.

I'll use an analogy. Think of a race car. And having the best driver in the world is quite the advantage as well. Without a superbly designed and cared for automobile, that driver will never take a checkered flag—ever. In the same way, though, Hyperliquid will require a deep team and rock-solid technology to win over the years.

Hyperliquid vs. Traditional Finance: Apples and Oranges?

Pitting Hyperliquid against traditional financial institutions may feel apples to oranges at first. It’s a worthwhile thought experiment for getting a better read on the risks and rewards at play. Traditional financial institutions are subject to strict regulations and oversight, while DeFi platforms operate in a much more Wild West environment. In exchange for this light-touch regulation, there is more room for innovation and flexibility, but there is more risk.

Consider this: a bank is required to hold a certain amount of capital in reserve to protect depositors. But those protections aren’t necessarily present on DeFi platforms. To become a truly successful platform, Hyperliquid has to prove that it can take on risk and keep its users’ funds safe.

This recent connection to NFT activity is equally fascinating. Interest in high-value NFTs, especially those above $100K, is booming. This flurry of activity is on par with the whale risk appetite seen for tokens like HYPE. This is an indication that we are in the truly dumb, unsustainable, bullish market.

So, is Hyperliquid’s $72 million May profit sustainable, or is it just a one-month wonder? The answer, as always, is complex. Make no mistake, the platform has already done for itself an impressive feat, but it has much yet to prove. Further, it needs to convince that there’s a sustainable path for its revenue streams. It ought to demonstrate that it can successfully compete in the active DeFi environment, navigate regulatory risks, and depend on a capable team with robust technology. Until then, I'll remain cautiously optimistic.