Should You Buy Hyperliquid (HYPE) After Its Recent Surge?

It's hard to argue with Hyperliquid's (CRYPTO: HYPE) recent performance. It's up an astounding 194% in 2026, and now trades near an all-time high of $77. Most assuredly, it has been one of the standout crypto performers of the year.

But should you really believe the hype about HYPE? Unfortunately, there's one big reason why I'm not buying Hyperliquid after its recent surge.

The arrival of new competitors

Hyperliquid, a decentralized cryptocurrency exchange, made its name offering perpetual futures to crypto traders. These perpetual futures allow traders to make highly leveraged bets on the future prices of popular cryptocurrencies, all without actually owning the underlying crypto.

As can be imagined, perpetual futures have been a smash hit in the crypto world. It's very easy to make long or short bets on crypto, so you can make money regardless of which way the market is moving.

Image source: Getty Images.

However, until recently, these perpetual futures were not widely available in the U.S. market. Regulators viewed them as too risky due to their use of leverage and the ability to liquidate positions overnight. Even a slight 10% move in the market might be enough to wipe out your collateral.

But that's all about to change. In early June, prediction market platform Kalshi became the first CFTC-regulated domestic exchange to offer trading in perpetual futures. And by all accounts, the launch has been a notable success. In the first week, Kalshi saw a head-spinning $1 billion in trading volume on its platform.

And it's not just Kalshi that could be a threat to Hyperliquid. Centralized cryptocurrency exchange Coinbase Global (NASDAQ: COIN) also wants in on the action, given how perpetual futures trading is a natural complement to spot crypto trading. As does Robinhood Markets (NASDAQ: HOOD), given the potential of perpetual futures to ramp up trading activity in prediction markets.

From my perspective, it's only a matter of time before Hyperliquid starts to get squeezed. Right now, U.S. customers can't use the Hyperliquid platform (at least legally), so they'll be using Kalshi, Coinbase, and Robinhood.

In order to offer perps to U.S. customers, Hyperliquid must undergo an official CFTC review process. While Hyperliquid has suggested it is willing to do this, it's not clear how much time it might take, or whether it will require a modification to how these contracts are traded within the U.S.

The "Wild West" period is coming to an end

Long story short, the "Wild West" period for perpetual futures is coming to an end. Crypto-friendly U.S. regulators have finally embraced perpetual futures, and that's going to tip the playing field away from Hyperliquid. The big winners will be the highly regulated U.S.-based competitors. You won't need to hunt for some offshore destination to get your "perps" action.

It's similar to offshore gambling -- as soon as the U.S. legalized online gambling, all the action came to U.S. casinos and sportsbooks.

It was fun while it lasted, but does anyone really expect Hyperliquid to deliver 200% returns on an ongoing basis from here on out? I don't, and that's why I'm not buying Hyperliquid after its recent surge.

Dominic Basulto has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hyperliquid. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.