Exchange
|7 min ReadHyperliquid Dominance Breaks As Competitors Seize Momentum
Jax Morales
Senior Analyst
Published
Jan 16, 2026
In May 2025, Hyperliquid dominated on-chain perps with roughly 80 percent of DEX volume. By early December, that figure had collapsed to around 20 percent as rivals like Lighter surged on aggressive incentives and faster vertical execution. The sharp reversal has sparked a simple question across trading desks: did Hyperliquid blow its lead, or is it reloading in a different lane.
The answer sits in a deliberate shift from retail front end to infrastructure backbone. While competitors sprinted to copy Hyperliquid’s product surface, the core team spent the year turning itself into what many describe as an “AWS of liquidity” for crypto derivatives. That choice has clear costs in the near term. It also builds a structure that could route huge flows through Hyperliquid rails if builders and new apps show up.
From Meme Perps To A Relentless Dominance Run
The first phase of Hyperliquid’s rise was brutal for competitors. From early 2023 through mid 2025, the exchange stacked consecutive all time highs in volume, open interest, and user activity. A points based reward system pulled in liquidity. The engine stayed online even during violent market breaks. Fees undercut centralized exchanges. The UI set the standard for on-chain perps.
Hyperliquid became the default venue for new narratives. When meme and election tokens like \$TRUMP and \$BERA listed, liquidity concentrated there first. Pre-market perps on names such as \$PUMP, \$WLFI and XPL turned the exchange into the earliest place to trade emerging trends. Traders who wanted sizing on new meta had little choice: route through Hyperliquid or get front run.
Spot listings and HyperEVM support widened the product surface. Builder codes and early infrastructure proposals like HIP-2 invited third party experiments while preserving a clean core experience. For more than a year, market share climbed almost in a straight line. By late spring 2025, tracking from @artemis showed an environment where Hyperliquid’s lead looked untouchable.
Competition Exploits Hyperliquid’s Transition Phase
The second phase began when that dominance peaked. After May 2025, market share bled steadily lower, dropping from about 80 percent to roughly 20 percent by early December, while rivals closed the feature gap and turned incentives up to eleven.
Hyperliquid’s own strategy explains a lot of the move. Instead of pushing harder into mobile, social features, or rapid fire new perp listings under its own brand, the team leaned into a B2B posture. The focus shifted to infrastructure like builder codes and HIP-3, designed so external teams could launch markets and build custom front ends on Hyperliquid liquidity.
That approach slows things down in the short run. Infrastructure takes time to propagate. External builders rarely have the distribution or trust of a battle tested core team. While Hyperliquid invested in the plumbing, vertically integrated competitors kept operating with a simple playbook: ship directly, own the experience, absorb users.
Lighter is the clearest beneficiary. The exchange has recently led DEX perp volume with around 25 percent share, according to data circulated by @artemis, while still in a pre-token, points farming phase. It offers the full suite that traders expect from Hyperliquid style platforms, then adds extras from spot markets to perp stocks and FX. Crucially, it has been willing to pay for flow via structured incentives.
In DeFi, liquidity is ruthlessly mercenary. Flows chase airdrops and seasons. Much of the volume that migrated from Hyperliquid to Lighter and other venues is likely points driven and sensitive to TGE timelines. That does not make the drawdown painless for Hyperliquid, but it does frame it as a competitive incentive cycle rather than a collapse in core product relevance.
HIP-3 And Builder Codes Aim At The Next Wave
The third phase is about whether Hyperliquid’s infrastructure bet pays off. HIP-3 and builder codes are central to that thesis.
HIP-3 allows external teams to launch perpetual markets on top of Hyperliquid’s underlying engine. Several recognizable builders have already plugged in. @tradexyz has listed perpetual stocks. @hyenatrade routes trading against USDe. Experimental markets like @ventuals for pre-IPO exposure and @trovemarkets for niches such as Pokémon or CS:GO assets expand the product frontier beyond anything a single in house team could prioritize.
The flywheel comes from pairing HIP-3 with builder codes. Any wallet or app that integrates Hyperliquid can access the full HIP-3 catalog. That means a builder who spins up a market once can see it distributed across many front ends at once, from Phantom and MetaMask to newer interfaces like BasedApp. Volume from these integrations routes back through Hyperliquid’s core liquidity pools, while builders share in revenue via codes.
So far, the builder code ecosystem is still dominated by crypto native surfaces. Revenue and daily active user data shared by @hydromancerxyz show a steady ramp, not an explosion.
The bigger prize is off-chain. If a new generation of “super apps” emerges on top of Hyperliquid, targeting users who do not think of themselves as DeFi traders at all, the exchange can win a much larger addressable market while remaining mostly invisible to the end user. In that world, its brand matters less than its reliability and liquidity depth.
That is the structural bet. Hyperliquid sacrificed some short term dominance to build a platform for many front ends instead of one. Rivals are exploiting that transition with incentives and vertical speed. The next two years will show whether mercenary liquidity rotates back toward the deeper rails or sticks with whoever is paying more in points.
For traders, the key is to separate noise from regime. Hyperliquid is no longer the only place to trade hot perps, and that matters. But the same infrastructure that slowed its growth this year could be what routes a significant share of future derivatives flow through its engine, even when traders never visit the main site.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.