Investment Memo: Long HyperLiquid ($HYPE) / SHORT ZKsync ($ZK)

Executive Summary

The Long position on Hyperliquid ($HYPE) is driven by its growing perp DEX market share, strong revenue performance, and tokenholder-aligned mechanics such as buybacks and revenue sharing.

Conversely, the Short thesis on ZKsync ($ZK) reflects declining user activity, stagnant TVL, and an upcoming token unlock that may exert downward pressure.This pair is chosen based on diverging sector trends — rising perp DEX traction versus weakening momentum across general-purpose L2s.

Investment Thesis

a) Hyperliquid ($HYPE) — Long

In the increasingly competitive landscape of decentralized perpetual trading, most platforms still struggle to strike a balance between performance, user experience, and decentralization. Hyperliquid stands out among perpetual DEXs with support for over 130 tokens, consistently high trading volume, and infrastructure that enables high-frequency trading. These factors contribute to a strong value proposition for the $HYPE token, making it a logical long-position candidate.

Our investment thesis on Hyperliquid is driven by five key factors:

1. Market Share Leadership: Hyperliquid has held the top position in the perpetual DEX sector by market share since August 2024 and has maintained this dominance for approximately nine months. Climbing to the top in a highly competitive field within just six months signals a fundamentally well-structured protocol.
2. Strengthening Metrics: Key performance metrics such as market share, volume, revenue, and TVL on both Hyperliquid and HyperEVM have either continued to rise or remained stable. This consistent performance underlines ongoing growth and protocol resilience.
3. Token Value Support Mechanisms: Hyperliquid has a distinctive model to drive sustainable token value. The protocol distributes 46% of its revenue to liquidity providers, incentivizing ecosystem participation. Simultaneously, 56% of total revenue is allocated to $HYPE buy-backs, reducing circulating supply and creating a deflationary effect. This combined mechanism enhances long-term token value while ensuring user-aligned economic incentives.
4. Price Performance: Although a relatively new token, $HYPE entered the market at around $6.5, reached an all-time high of $35, and is trading near $20 at the time of writing. This performance within a short timeframe reflects strong market interest and belief in the token’s fundamentals.
5. Solid Tokenomics: Hyperliquid’s tokenomics set it apart from competitors. There are no venture capital unlocks or major early investor allocations that typically result in sell pressure. The only potential source of significant selling is the core contributor allocation, which remains locked until November 2025.

These key factors demonstrate that the $HYPE token is built on strong fundamentals and is not merely a product of short-term hype, but rather founded on a sustainable long-term framework. Its market leadership, growing metrics, and uniquely designed revenue sharing and buy-back mechanisms make it a compelling candidate for a long position in the short to mid term. Nevertheless, potential attack vectors previously observed in similar protocols — which could directly affect $HYPE’s price — along with the centralization debates and external regulatory risks they might trigger, must be monitored closely.

b) ZKsync ($ZK) — Short

After Ethereum adopted a rollup-centric roadmap, general-purpose rollups gained prominence and have since matured significantly in terms of technology. However, the sheer number of rollup projects, the complexity of development, and limited user adoption have intensified competition within the L2 space. ZKsync, as a zkRollup, brings unique technological features, but in this competitive environment, there are major concerns around the sustainability of the $ZK token’s performance.

Our investment thesis on ZKsync is driven by five key factors:

1. Intensifying Layer-2 Competition: According to L2Beat, there are over 62 active rollup solutions and more than 88 validium/optimium-based alternatives operating on Ethereum. The growing number of Layer-2 solutions has created fierce market competition, raising doubts about ZKsync’s ability to maintain a strong market position in the long run.
2. Declining Metrics Across the Board: ZKsync has seen a prolonged decline in both active addresses and transaction counts. Additionally, the total value secured (TVS) has remained stagnant for an extended period. This suggests that users are not sufficiently incentivized to engage with the network and are instead migrating toward alternative solutions.
3. Limited zkRollup Adoption: Among the top 20 rollups by Total Value Secured (TVS) on L2Beat, only five are zkRollup-based. This implies that optimistic rollups have maintained a first-mover advantage, while zkRollups like ZKsync have faced more challenges in driving adoption, potentially due to higher complexity and developer onboarding friction.
4. Weak Price Performance and Lack of Support: The $ZK token debuted at around $0.21, briefly reaching an all-time high of $0.26 six months later. However, it has since steadily declined, trading around $0.057 at the time of writing — despite no major token unlocks having taken place yet. This persistent downtrend reflects a lack of organic demand and diminishing market confidence.
5. Upcoming Token Unlocks Pose Supply Overhang Risk: Since its launch, $ZK has not undergone any unlock events. The first unlock is scheduled for June 17, 2025, releasing 3.67% of the total supply to the team and investors. After that, monthly unlocks of 0.82% will continue. These unlocks are likely to create sustained sell pressure, especially given the downward momentum in usage metrics and a potentially stalled ecosystem.

The decline in ZKsync’s activity metrics can largely be attributed to waning interest after the airdrop, a trend commonly observed across L2 ecosystems. As user engagement fades and TVL growth stalls, the upcoming token unlocks — particularly those allocated to insiders — may accelerate sell-offs and further suppress the price. This setup positions $ZK as a candidate for a short bias, especially in the lead-up to unlock events and amid broader L2 market saturation.

Market Context & Sector Trends

After Ethereum adopted a rollup-centric roadmap, rollup projects gained substantial importance and many new initiatives emerged. However, the abundance of general-purpose rollups has raised concerns about user growth, sustainability, and long-term protocol retention. In contrast, on-chain perpetual protocols have shown stronger sectoral growth, retaining users more effectively and drawing attention with their rising volumes. Since Q4 2023, perpetual DEX volumes have increased nearly 10x, driven by growing demand for decentralized leveraged trading and improved trading infrastructure — particularly in the aftermath of the FTX collapse.

ZKsync is undergoing a post-airdrop decline — a fate shared by many rollups — and its recovery depends not only on internal dynamics but also on Ethereum’s broader ecosystem regaining narrative momentum. On the other hand, the perpetual DEX trend — largely catalyzed by dYdX — signals a shift in user behavior, with traders becoming more accustomed to decentralized platforms. Hyperliquid has capitalized on this shift with strong product-market fit, growing through organic user demand and currently leading the perpetual DEX sector.

Broadly speaking, current sector trends indicate that sustainable growth and user retention are increasingly driven by real product value rather than short-term token incentives. This divergence strengthens the rationale for a long/short pair-trade between projects like $ZK, which face continuous unlock pressure, and Hyperliquid, which is fundamentally usage-driven.

Data & Metrics

This section presents the key on-chain and market metrics that support our long/short thesis. Metrics were gathered from sources including Dune, Growthepie, and DeFiLlama, covering adoption, activity, value flow, and protocol fundamentals.

1. Hyperliquid

• Total Value Locked (TVL): The TVL on Hyperliquid surpassed $2 billion in less than a year, reaching an all-time high of $2.5 billion. At the time of writing this report, it hovers around $2.2 billion. Depending on overall market direction — particularly the movements of Bitcoin and Ethereum — it is anticipated that TVL could soon surpass the $2.5 billion mark again, with $3 billion as the next potential milestone.

• Total Users: Although it took nearly 12 months for Hyperliquid to reach 200,000 total users, the number doubled in just 5 months thereafter. This indicates a significant acceleration in user adoption.

• Daily New Users: When examining the daily new user count chart, we see that it peaks during upward market trends. This suggests a correlation between market movements and new user growth.

• Market Share: The chart below shows the market share of perpetual DEXs by trading volume on a weekly basis. As seen in the chart, Hyperliquid surpassed a 50% market share as of December 2024 and currently holds between 65% and 69%. Maintaining such a high market share in a highly competitive environment indicates that Hyperliquid is progressing with sound strategic decisions and is built on strong fundamentals.

• Annualized Revenue: Hyperliquid’s annualized profit has fluctuated between $390 million and $700 million over the past five months. This figure tends to increase during periods of heightened market activity and decrease during quieter periods. On average, the annual profit is expected to stabilize around $200–300 million, which could place Hyperliquid among the top 20 most profitable protocols.

• Daily Revenue: Hyperliquid’s daily profit ranges between $500,000 and $4 million, demonstrating that the protocol generates strong and consistent revenue. Since these earnings are utilized in revenue-sharing and buy-back mechanisms, they represent a highly important metric.

• Price Movements: Shortly after its launch, the $HYPE token surged from around $6 to as high as $32 and is trading near $20 at the time of writing this report. Its strong tokenomics and compelling narrative have been reflected in its price action, forming solid support levels.

2. ZKsync

• Total Value Locked (TVL): The TVL on the ZKsync network rose from around $50 million following the airdrop to as high as $850 million, briefly reaching the $1 billion mark at its peak. At the time of writing this report, it stands at approximately $550 million. The prolonged stagnation within a narrow range and lack of upward momentum suggest a slowdown in growth.

• Daily Active Addresses: Although daily active users on the network peaked at 385,000, the number has been steadily declining for a long time and currently sits at around 10,000. This dramatic drop indicates a significant decrease in user activity and interest on the network, suggesting that users are shifting toward alternative solutions.

• Daily Transaction Count: Although the daily transaction count was around 1 million a year ago, it has dropped to approximately 50,000 today. The main reasons for this decline include changes in user behavior after the airdrop, insufficient incentives, and a relatively limited ecosystem.

• Revenue: ZKsync’s profitability is quite limited. While daily profit peaked at around $24,000, it has steadily declined over time and currently hovers around $800. This metric correlates closely with the decline in active user count and transaction volume.

• Price Movements: The $ZK token was launched in June 2024 at around $0.21, reached its peak at $0.26 in December 2024, and has since experienced a continuous decline, trading at approximately $0.05 at the time of writing this report. This price trend closely correlates with other key metrics.

Risks & Considerations

While our investment thesis presents a data-driven case for a long $HYPE and short $ZK position, several key risks must be considered to evaluate the trade’s full risk profile.

• Market-Wide Risk: Macro-economic trends and policy shifts can place either side of the trade at risk. For instance, recent developments such as U.S. tariff policies or interest rate decisions by the Federal Reserve have had clear impacts on overall market direction. Similar events remain an ever-present risk.

In the crypto sector specifically, systemic collapses — such as those seen during the LUNA and FTX crises — can rapidly drag down market sentiment and prices. Any such crash or rally could significantly impact one side of this pair trade.

• Narrative Shift Risk: This analysis is built on the current upward trend in perpetual DEXs and the relative stagnation in Layer-2 narratives. However, market narratives can shift quickly and unexpectedly.

For example, a resurgence in Ethereum price momentum could reignite interest in ZK-rollups and Layer-2 networks, potentially driving $ZK price upward and placing the short leg at risk. Conversely, if the perpetual DEX narrative weakens, $HYPE could face temporary downward pressure despite strong fundamentals.

• Technical or Protocol Risk: The crypto industry has witnessed numerous large-scale hacks, and the risk of similar incidents remains present. Both ZKsync and Hyperliquid rely on smart contracts, which may be vulnerable to undiscovered bugs or exploits.

For example, a vulnerability in Hyperliquid’s bridge contract could lead to the loss of all TVL on the protocol, triggering a massive sell-off in $HYPE. Attack vectors aren’t limited to code alone; historical examples include targeted attacks on Hyperliquid’s HLP vaults. While the team has previously mitigated such incidents, their actions raised concerns around the decentralization of the Hyperliquid L1 infrastructure.

Other types of threats are also possible, such as social engineering attacks that compromise team members’ devices or credentials, hijacking of social media accounts, or front-end, back-end, and multi-sig exploits.

All of these scenarios apply to ZKsync as well. Notably, the team has already experienced a token loss incident involving a portion of the $ZK supply. While such an event might favor the short side of this trade, a similar incident on Hyperliquid would severely impact the long side.

• Regulation Risk: The evolving global regulatory landscape presents a material risk to both assets in this trade. Perpetual DEXs like Hyperliquid may attract scrutiny from financial regulators due to their leveraged trading offerings, especially if classified as unregistered derivatives platforms. Similarly, Layer-2 networks such as ZKsync could face regulatory challenges around data privacy, KYC compliance, and the classification of their native tokens as securities. Sudden enforcement actions or policy shifts could significantly impact usage, liquidity, and token valuations for either protocol.
• Volatility & Trade Imbalance Risk: The long/short pair involves assets with different volatility profiles. Rapid or asymmetric price movements — especially during macro or protocol-specific events — may create periods of temporary divergence, reducing the hedge effectiveness of the trade.

Conclusion

This pair trade thesis recommends a long position in Hyperliquid ($HYPE) and a short position in ZKsync ($ZK), based on clear divergence in fundamentals, metrics, and sector narratives. Hyperliquid is gaining rapid traction in the perpetual DEX landscape through rising TVL, strong revenue, and consistent user growth, supported by a token model that rewards both usage and holding. In contrast, ZKsync shows weakening user engagement, stagnant growth, and an impending unlock event likely to introduce additional sell pressure.

The expected holding period for this trade is short to mid-term, specifically targeting the window between now and one month following the $ZK token unlock in June 2025. During this time, we anticipate continued strength in $HYPE fundamentals and persistent downward momentum in $ZK’s price and metrics.

However, this thesis could be challenged by the following scenario:

A significant rebound in the broader Ethereum ecosystem, particularly in zero-knowledge-based narratives, could revive user interest in ZKsync and offset the unlock-driven sell pressure. Simultaneously, any protocol-level failures or centralization controversies within Hyperliquid — such as a smart contract exploit or backlash from regulators — could weaken the bullish case for $HYPE. Therefore, ongoing monitoring of sector-wide narratives, regulatory developments, and ecosystem-level user behavior is essential.

In summary, the long $HYPE / short $ZK trade offers a well-structured thesis grounded in current usage trends, token dynamics, and sectoral momentum. It presents an asymmetric opportunity to capitalize on the divergence between a rapidly scaling perp DEX and a stagnating general-purpose rollup.

Disclosure

This investment memo is prepared for informational purposes only and does not constitute financial advice or a recommendation to buy, sell, or hold any financial instrument. The analysis is based on publicly available data, historical metrics, and forward-looking assumptions as of the date of publication. Readers should conduct their own research and consider their financial situation before making any investment decision.

The report includes market data and projections that may be subject to change based on market conditions, regulatory developments, or unforeseen events. The author and publisher are not responsible for any losses incurred as a result of implementing the strategies or insights presented herein.

This memo may reference data from third-party platforms, which may contain inaccuracies or be subject to revision. Additionally, any statements regarding expected performance or future trends are speculative and not guaranteed.

By reviewing this memo, the reader acknowledges that all investment decisions involve risk, including potential loss of principal, and that past performance is not indicative of future results.