Key Points
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Stanley Druckenmiller has a couple of investments that grant him exposure to Hyperliquid.
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Hyperliquid will soon provide the infrastructure for a new and massive perpetual futures exchange.
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That new venue will be owned and operated by the company that owns the New York Stock Exchange.
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Legendary investor Stanley Druckenmiller just voiced his confidence in Hyperliquid (CRYPTO: HYPE), a leading decentralized cryptocurrency exchange for derivatives contracts, and it isn’t his first. On Oct. 29, he said that he’s invested in TradeXYZ, the newly announced partner of Intercontinental Exchange (NYSE: ICE) that plans to launch Hyperliquid-based markets for perpetual futures contracts in the U.S., pending regulatory approval. Importantly, Druckenmiller also said that he plans to use those markets himself.
In short, he’s bullish on Hyperliquid because of the role it’s playing in bringing perpetual futures to U.S. regulated markets; if you weren’t aware, ICE is the company that owns the New York Stock Exchange. So what does this deal mean for investors, and how does Druckenmiller’s perspective factor in?
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Druckenmiller now has two different bets on Hyperliquid
TradeXYZ is a company that’s closely linked to Hyperliquid and launches perpetual futures contract markets for stocks and other assets, while Hyperliquid’s blockchain runs them. Hyperliquid has a feature called HIP-3, which allows third parties like TradeXYZ to deploy those markets on its network in exchange for staking 500,000 HYPE tokens.
When the third-party perpetual contracts change hands, Hyperliquid gets 50% of the transaction fees and the deployer the other half. So Druckenmiller’s investment in TradeXYZ entitles him to upside if the business can continue to create the markets that traders and investors want to participate in.
Also, 99% of the transaction fees from trading on Hyperliquid’s network go to a fund that buys HYPE on the open market, like a stock buyback. That process has permanently removed 49.9 million tokens from circulation as of Oct. 30, approximately 5% of the token’s maximum possible supply. Druckenmiller is betting that both Hyperliquid and its biggest deployer of new markets are going to go even bigger than they already have.
Through the Duquesne Family Office he manages, he also gains upside through a second channel: a $23.1 million stake in Hyperliquid Strategies as of June 30. Hyperliquid Strategies is a digital asset treasury company that buys and holds Hyperliquid, issuing more of its shares to then buy even more.
Should investors follow Druckenmiller?
If the ICE deal with TradeXYZ ends up bringing a lot of transaction volume to Hyperliquid’s rails, as it almost certainly will, Druckenmiller stands to capture value from the Hyperliquid buybacks through his Hyperliquid Strategies stake as well as from the TradeXYZ fees, and he might even be paying back into the system to the degree he uses these platforms for his own purposes. I think he likes what he sees here, both as an investor looking in from the outside and as a user of the technologies that make the network popular.
That doesn’t make Hyperliquid the right investment for everyone, though.
Despite its incredible traction in its target market and its holder-friendly model, Hyperliquid is not necessarily a safe investment; it has many competitors that also offer perpetual futures, both inside and outside of the crypto sector. More than a couple of those competitors, like Robinhood Markets and Coinbase Global, have vast resources they can choose to bring to bear.
Still, Druckenmiller’s votes of confidence in the network make it a lot harder to turn down, and I may add to my Hyperliquid position in the coming weeks as a result.
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Alex Carchidi has positions in Hyperliquid. The Motley Fool has positions in and recommends Hyperliquid. The Motley Fool recommends Coinbase Global, Intercontinental Exchange, and Robinhood Markets. The Motley Fool has a disclosure policy.
