Hyperliquid's Momentum Is Fading Fast -- Here's Why the Market Is Treating HYPE as a Trade, not a Long‑Term Buy

Hyperliquid (CRYPTO: HYPE) launched just 18 months ago, and it already ranks as the 10th-largest cryptocurrency in the world, with an eye-popping $10 billion market cap. It's up a staggering 1,177% since launch, including a nice 60% pop to start off 2026.

However, the hype and buzz surrounding Hyperliquid is fading fast. If you're looking for a cryptocurrency to buy and hold for the long haul, you may soon need to look elsewhere.

The rise of Hyperliquid

Hyperliquid is a decentralized exchange where traders primarily buy and sell cryptocurrencies. However, they are not just trading crypto in the spot market -- they are also trading crypto in the futures market. And that's where things get interesting.

The key to Hyperliquid's meteoric rise to fame can be summarized in two words: perpetual futures. This is a type of highly speculative financial derivatives contract with no expiration date, in which traders do not need to hold the underlying asset. With perpetual futures, massive leverage (up to 100x) is possible, making them particularly suited to speculating on cryptocurrencies that can skyrocket in value.

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They're also highly risky and prone to immediate liquidation if prices fall, which is why Hyperliquid is still off-limits to U.S. customers. If you attempt to use the Hyperliquid trading platform in the U.S., you will receive a red warning message about being in a restricted jurisdiction. (Trust me, I've tried it myself.)

Globally, Hyperliquid accounts for a staggering 70% of the total on-chain trading volume for perpetual futures contracts. It has quickly become the go-to place to speculate on digital asset prices if you're based outside of the United States.

The fall of Hyperliquid

Hyperliquid's stunning success may also be the reason for an equally stunning fall from grace. New competitors are now attempting to wrest away market share. Until recently, many of these competitors have been other decentralized exchanges, and the threat has been minimal.

But that could change soon. That's because centralized cryptocurrency exchanges such as Coinbase Global (NASDAQ: COIN) would like to offer perpetual futures trading to their retail customers, once they have been fully approved by U.S. regulators.

And now comes news that prediction market platforms Kalshi and Polymarket are also making the move into perpetual futures. In order to offer these contracts on their platforms, they will need regulatory sign-off from the Commodity Futures Trading Commission (CFTC). If that approval comes soon, it could be game over for Hyperliquid.

What happens next with Hyperliquid?

There are two ways to think about recent price activity for Hyperliquid. If you're a glass half-full type of investor, then you can point to a 60% gain to start off the year. That's surely a good sign, given that the market bellwether Bitcoin (CRYPTO: BTC) is down 10%, right?

But, if you're a glass-half-empty type of investor, there's reason to be concerned. The HYPE token is now down 30% from its all-time high in September 2025. Maybe Hyperliquid turns out to be yet another cryptocurrency that goes parabolic, only to crash back down to earth.

If you're thinking about investing in Hyperliquid, keep an eye on the overall competitive landscape. If centralized cryptocurrency exchanges and prediction market platforms start offering perpetual futures contracts to the average investor, there's no way that I'd touch Hyperliquid with a 10-foot pole.

Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Hyperliquid. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.