If you follow us on X, you already know the big news of this week.

Trade[XYZ] partnered with S&P Dow Jones Indices (SPDJI) to launch the first official S&P500 perpetual contract.

This means the only official S&P500 perp is from Trade[XYZ], and it’s only on Hyperliquid. It’s the only one anchored by the official index data and the only one allowed to use the official S&P500 name.

This is so big that we can’t properly share our analysis only in a regular weekly update.

And it’s impactful enough that it changes our view of the ecosystem, and how we’re allocating our capital here.

But, before we get ahead of ourselves, here are the steps we’ll take in this post so you follow our train of thought:

This is now a bigger change, but before we go into more details…

Aka, Hyperliquid Improvement Proposal 3: Builder deployed perps on anything, with revenue shared between deployer and the Hyperliquid protocol.

This enables a deployer who stakes 500k HYPE to deploy a DEX for whatever assets they want. 

Deployers like Trade[XYZ] have done stocks, indices, commodities, and even forex. You also heard us mention Markets by Kinetiq, which took the same approach as Trade[XYZ] in terms of assets but using a different oracle partnership and a different quote asset (USDH for Markets, USDC for Trade[XYZ]).

Other deployers are Dreamcash, Felix, Ventuals, and HyENA.

Precious metals and oil have both had their time in the spotlight and pushed HIP-3 headlines but indices have been the silent and steady growers in terms of activity.

Peak OI is just over $1.5B with very fast growth.

Trade[XYZ] started with XYZ100, which is basically the QQQ without the IP.

Dreamcash and Markets had US500 as their flagship, aka the S&P500 without the official name or index data.

It looked strange that Trade[XYZ] never listed the S&P500, and now it all makes sense…

Between the X post and the official press release, here’s what we know:

One thing that is also implied or hinted at without a bigger official announcement: This is just one step, and there are likely to be more official indices licensed to Trade[XYZ] this way as part of SPDJI’s push into DeFi and blockchain tech.

First off, we don’t think the exclusivity debate matters too much because others have used intuitively named tickers that still seemed to perform well.

And the name is not what makes the deployer successful; it’s the liquidity, the tight spread, and the accurate pricing/oracle.

We also think this is a positive side of the overall Hyperliquid regulatory risk, although what the SEC and CFTC say and do matters much more. Still, a good sign…

Our take on the biggest factor: The exposure to TradFi eyes. Trade[XYZ] and Hyperliquid have taken a huge step forward. And in the HIP-3 context, we think that, along with its already dominant on-chain position, Trade[XYZ] has basically won HIP-3.

They are almost synonymous with it, especially when it comes to indices, stocks, and commodities. The SPDJI partnership is just the final confirmation of that.

Liquidity brings more liquidity, and Trade[XYZ] is far ahead in that. It’s very much a winner-takes-all environment, at least when it comes to a specific category of markets.

(It’s no different for the general crypto perps DEX market, and why we think LIT, ASTER, or anything that is not HYPE for a perp DEX token is a bad hold, but that’s a story for another time)

Trade[XYZ] is already the third biggest perp DEX by OI according to DefiLlama, and we think they’ll be #2 within weeks of us writing this. 

They also rank very well in terms of revenue across all of crypto, on pace to make $3.5-$4M in March.

Markets by Kinetiq had their OI drop to around $11M from a peak of $25M last week. Dreamcash is also down to $50M after their $65M peak.

Only Trade[XYZ] is showing strong growth.

And Trade[XYZ] has no token, no points season, and their spot deployer arm, known as Unit, uses all its fees to buy HYPE.

Our assumption is that Trade[XYZ] and Unit are extremely unlikely to create a token, and HYPE is the de facto token for them.

Compare this to Markets by Kinetiq, which already has KNTQ deployed and specific value accrual mechanisms from both the staking business Kinetiq initially launched, and from their other products.

Dreamcash also seems likely to launch a token, as does Ventuals, and HyENA is already part of the Ethena ecosystem, with Based as a partner with a TGE coming up soon.

So, Trade[XYZ] is crushing with no incentives, while the incentivized competition is lagging behind at the moment.

In short, the biggest HIP-3 winner has no token or signs of planning one.

KNTQ token also went down to almost $0.10 soon after the announcement, and although it might not be the only reason, it’s probably partially to blame.

We’ve already mentioned that we sold our HPL (HyperLend) airdrop at $0.018 because the coming utility is not useful for us, and we think that’s close enough to fair value.

Now, our KNTQ and kmHYPE thesis also has to be adjusted.

We had already started unstaking kmHYPE a few days before the announcement because we assumed kPoints S2 is almost over, and we don’t receive much now compared to those trading on Markets.

For kmHYPE, we just want to avoid any vHYPE-like situation, given the lower performance for Markets, and the fact that we’re under the 888k kmHYPE cap already.

We will be switching it to kHYPE.

More importantly, though, we’re now looking to sell our first KNTQ airdrop, probably somewhere between $0.15 to $0.20 level.

You’re probably thinking: “KNTQ already went down, why the hell do you think it can still go up so much?”

A couple of reasons:

Those two things will already push the price higher quickly, at least temporarily. Potential hype and FOMO from some more announcements can also get people excited.

Last but not least, Kinetiq’s staking business benefits significantly from HYPE price going up too.

So, over time, KNTQ is likely to still go up, but we don’t think it will outperform HYPE.

And that $0.15 to $0.20 level is where we think the buybacks put it close enough to fair value vs HYPE (unless HYPE goes way lower or way higher too), that we will sell our KNTQ airdrop from S1.

That said, we also think S2’s airdrop is soon around the corner, so that could change our plans. 

We are also not 100% decided if we want to sell all our S2 KNTQ allocation too. The second airdrop will bring more sellers as well, so maybe we lower our selling price too.

We’re mostly looking at the HYPE/KNTQ ratio to decide, rather than the USD value of KNTQ.

One big question on many people’s minds: Is it worth holding anything else except HYPE in the Hyperliquid ecosystem?

We wrote our answer above, but we don’t think this will always stay the same.

As projects and protocols become more mature, as their value accrual becomes clearer, as their emissions stabilize, as they gain more utility, both from their own protocols and within DeFi, they will have a price where they’re worth buying and holding.

And that’s something we’ll keep an eye out for.