We Asked Flood About His Hyperliquid Bull Thesis

Transcript

It's important to understand what builder codes really unlock for the Hyperlid ecosystem. Thinking about both the buyback machine, that's easy to quantify, but what's hard to quantify is the amount of growth that Hyperlid can experience because liquidity begets liquidity. What is that like kind of back going back and forth with Arthur used to trade on BitMX now with Hyperlid? You guys are on the same team. How has that dynamic changed? Welcome back to the Rowup. We are your hosts. I'm Andy. I'm Robbie. And this is your home to learn from the biggest guests, the brightest minds at the tip of innovation. Our goal is to help spread the collective knowledge of everyone in our community. We are breaking crypto out of its echo chamber

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Learn more at magic Newton onx. Hey, thanks for uh thanks for having me. Happy to be here. Um yeah, I want to make a similar disclosure. Obviously, I own hype. Um very very bullish on hype. We we'll be talking our book and obviously I um I run in Silicone Terminal as well. So, you know, any any promotion of usage of that platform like uh you know, I may be slightly biased. I'll put it that way. Man, I got to ask um Flood. uh you know, Rob and I have been following uh accounts like yours and yours specifically since probably late 16, 17 into the 18 cycle and uh you've had the singular PFP for so long, man. What prompted the change, man?

Um I think we're undergoing a fundamental shift in crypto. I think we're finally seeing the rise of long short actually mattering and retail that's been able to stick around has grown up. I mean, we've all kind of grown up together since 2017. And I think now we're no longer bamboozled by, you know, people writing venture checks or all of this vaporware or all of this, you know, sort of fluff around infrastructure and this dream that was promised back in, you know, 2017 18 either delta days of permissionless finance. I think we've seen that there has to be trade-offs and compromises, right, to make sure that user experience

is comparable. And that's where we're getting to. I I don't want to go too deep into it. There's some some deeper lore as to why I changed the profile picture, but I think we're undergoing a regime change in crypto. People are tired of being fed That's the reality. Like people are tired of being fed these overfunded, you know, loweconomic utility, yo, low general utility tokens. And that's why you're seeing such a surge around hyperlquid and other um I think things that are capturing you know market share by doing things right on multiple levels both from a product perspective token design perspective and fundraising perspective. Yeah. I mean we were just talking about um Ekko's sonar

release for kind of bringing ICOs back in some capacity. Uh obviously we've gone through an entire like the infloat the FTV you know just like there's just there's been an entire transition. So um I you know I think we're getting closer back to the crypto ideals that as you said that we were kind of promised. So don't need to harp on that but what what I think a lot of people want to hear about is this James win and your take on this. So for someone to be up 80 million uh on Hyperlid the billion dollar uh position open obviously 40x long uh long short kind of been flip-flopping then now close to negative reloaded another $250 million last night in long. What is the psychology of a trader like James Win? You know it took him 70 days to go

from zero to 87 million and then five days nearly to to lose it all. If he was listening right now, what would be your message to him as well? on what do you think his his psychology is? I think we're very fortunate to be able to view this stuff and this access th this data being accessible to anybody for completely free. Like before, only a select few of centralized exchange insiders and account managers were able to see and potentially leak info on large accounts um and their P&L and how well they've been doing, right? Because um that data was completely private and now we're able to, you know, watch

people uh impale themselves on leverage if they choose to. But I think the perspective of someone like James W, I don't know that I have any advice for them. I think their path is pretty pre-ordained. I think they're going to do what they want to do and they want to gamble and it's your right to gamble, right? And I don't think there's a greater casino in the entire world than hyperlquid because if you want to place a billion dollar bet and have it be verifiable provably and have everybody in the world be able to tag along in real time as to what your P&L is.

There's no other venue that can facilitate that other than hyperlquid. Theoretically, you could, you know, buy a billion dollars of ETH and deposit into Maker Dow and leverage up, right? You know, so there are other venues you could do this on, but those aren't as sexy and they don't offer the same amounts of leverage that Hyperlid does or that quick dopamine rush where he was getting in and out of billion dollar positions. I I tell him I think, you know, if your goal is to get a lot of attention and you're just you truly have an infinite amount of wealth, he's probably doing things optimally. If he does want to make money, I think he should be a little more particular about how he's executing. Um because he is just losing

a lot of expected value that way. But some people don't care. And I think we're lucky to tag along to this degenerates ride. you know, before it's really only CZ and his crew who'd be able to uh view a position like this, you know, and I'm sure they have a dashboard with all this stuff at at Binance headquarters where they view all the large whales and their liquidations and their risk. But it's um no, we're we're really fortunate actually and that's kind of one of the coolest things about Hyperlid is, you know, um access to data. It's completely free. It's a level level playing field for anyone trying to use um positioning data leverage um trade data historical P&L as actionable alpha. Anybody can do it.

Yeah. Back in the day it was just Arthur Hayes counter trading everyone on his insurance fund uh who had access to the data. You you recently went back and forth with Arthur a little bit uh you know just kind of setting up I think he's also uh on the hype train. H how how what is that like kind of back going back and forth with Arthur? Used to trade on BitMX now with Hyperlid. You guys are on the same team. How is that dynamic changed? I mean I've been lucky enough to um I I've been I've been fortunate enough to consider some of the BitMX founders I would say friends and work with them on some things. I respect them

a ton professionally and I don't think they get enough credit for really pushing the perpetual swap as far as it could possibly go with um you know 100x leverage and and all of the early infrastructure that they built. It was pretty crude. I think uh BitMX's infrastructure I think I remember it being 70 orders per second not trades but orders per second back in 2017 2018. So, it's kind of a miracle that they were able to facilitate as much volume as they did. Um, but they also don't receive enough credit for never, knock on wood, having any security issues or any hacks for user funds. I think that in this day and age is almost the only

thing that I really care about from an exchange side. And the fact that they haven't, I think they deserve a lot of credit for that. They did things correctly. they implemented best practices and they're extremely talented and bright individuals and you know um but yeah I mean Arthur's a Arthur is someone he's a hero of mine you know I mean he he's he's pulled out you know some of the largest capital in crypto in a fairly ethically way by building a product that everybody wanted. I don't think there's any better way to make money in crypto. Um, and you know, credit to the BitMX team and yeah, they've lost a considerable amount of market share, but you know, they they

sort of live on to fight another day, but there's no one better to champion Hyperlid than someone like Arthur who recognizes how high stakes these exchange games are and how much money is on the line. I mean, I'll say this, and you know, my figures could be slightly off because I don't have detailed data, but people fundamentally mispric Hyperlid, and Arthur is one of the people who actually has the best pricing and probably the most edge on it. And there's a reason why he's so bullish because people don't realize the global perpetual swap market is anywhere from 20 to$30 billion in revenue a year. I mean, Binance conservatively makes $10 billion a year in revenue. Revenue, right? Not net profit. They're not as

lean as Hyperlquid is for many reasons, but Hyper Hyperliquid does about one6th 17th the volume that you know Binance does on per sometimes less, sometimes more. Let's call it one10enth for easy math. Um, if Binance is making a billion or excuse me, if Hyperlid is making a billion a year, you know, that puts Binance at which they have higher revenue per user at conservatively $10 billion a year in revenue. And that's just from PES. That's not including der, that's not including spot. That's not including their yield products, revenue from the launchpad, their marktomarket value from B&B. So like we're really seeing I think the unbundling of Binance in real time via Hyperlid and all of the

things that Hyperlid will enable from builder codes to HIPP3 to self-custody to protocols built on top of it, front ends built on top of it. Binance is many businesses rolled up into one and this is sort of the unbundling of that I think which is which is incredible to see in real time. So, so then if we were to ask then on a follow-up to that, like what you think is not priced into Hyperlid, would that be is it mostly around the way people are thinking about it or or is there is there like technical or roadmap or kind of other items of of of hype that people are not kind of thinking about and that aren't priced in or is just mostly the kind of thought process around how to

value it? Yeah, it's anformational asymmetry, right? Um, when you're thinking about both the buyback machine, that's easy to quantify, but what's hard to quantify is the amount of growth that Hyperlid can experience because liquidity begets liquidity, right? Market makers and traders are pretty uh neutral when it comes to the venue they trade on. Like I trade on multiple different venues. I trade on Binance, I trade on BBIT, I trade on OKX and I trade on Hyperlquid and I trade on chain, right? So, you know, um valuing Hyperlid comes from or or the reason why there's anformational asymmetry is

people don't realize just how profitable these exchanges are. Coinbase has obviously a different model where they're a much higher take rate um and they're charging, you know, 60 basis points out of the box for a spot, but they have 6.5 billion in revenue a year and a few billion of that comes from trading, right? So, you can Hyperlid is still in the very early innings of its potential growth and people are not valuing the token appropriately in my opinion. We're still buyers up here. We we've still been net buyers almost every day, right? And we have topside ball exposure, so obviously I'm biased. Um, but yeah, there's been rumors, Floyd, that there's been there's been rumors

that you've already dumped well over eight figures of hype. I mean, people I mean, I can say that that's definitively not true. Um, but there's a very there's a difference between being a net seller on one venue and using it to market make. We actually haven't been market making much of the hype spot. So, we haven't been net sellers generally. Have we sold some at times and bought it back? Yeah. I mean, I'm a trader, right? Um, and the purpose of investing and trading is to buy things low and sell them high, right?

And your time duration for doing things uh may differ, right? I may buy something and and sell it a minute after. I may sell something and buy it back a month after, right? I mean, it's your right to buy and sell assets whenever you want, but I'm not saying that it's a problem. Of course. Yeah. Yeah. I mean, I I don't know. People love to speculate on things. We have been and it's easily verifiable if if people have any amount of onchain diligence like much larger net buyers than net sellers of hyperlquid. Plus, we have millions of dollars worth of premium in in hyperlquid call spreads, right? In high call spreads. So, you know, that's uh that's as well.

That's as degenerate as it gets for uh for offside exposure. So, I think there's a bit of a war going on right now. Um Hyperlquid and Salana. Basically, my perspective from the technical lens is Salana's gone out and be like, well, Ethereum's slow and expensive. We're just going to create a bit more of a centralized, faster, cheaper chain, less validator, scale it up. Hyperloop came in even even more on on the logical extreme was like well Salana is not going to do it for a you know highly performant uh per stack X onchain we're going to do it this way less validators way better uh execution and you put out a tweet saying that just like ETH Salana is fundamentally uninvestable I think this hyperlquid and

Salana dynamic is getting a bit stronger over the last couple of weeks to months um you know people are talking about uh hype flipping soul uh what's what's your take on this dynamic right now and and why is hyperlquid in your view much more industrial than soul? I'm going to sound pretty controversial and inflammatory here but I think a lot of my views are rooted in examples from traditional finance and they're not always directly correlary but I think they do matter in this example. I think most L1s are commodity businesses and if you want to own commodity businesses that's fine.

They tend to do pretty well. Railroads are still businesses today, but they are commodity to some extent, right? And the person that is shipping goods does not care which vehicle they ship on, whether it's boat or train or truck or camel. They just care that it gets to the destination and that it is as efficient and cheap as possible and it fulfills all of the things that they are optimizing for. Users who will use blockchain technology knowingly or unknowingly to trade and transact values will not be deterministic for which chain they are using. In fact, they may not even know which chain they're using

because it will be wrapped in a wallet or wrapped in a front end or wrapped in some sort of very pretty UI that lets them do things more efficiently, right? So, what do I mean by this? You can imagine that trading for a business like Robin Hood, which is a front end, right? And frontends receive the majority of value in traditional finance. If you take the market caps of frontends, what do I mean by a frontend? Robin Hood, Interactive Broker, right? Uh Vanguard, Fidelity, Schwab. Schwab has 10 trillion of assets under management. These are frontends essentially that allow you to plug into all of the matching engines and trading venues all across the world, right? And well, specifically for the US, but

theoretically all across the world, the user doesn't care if they trade on NY or BATS or NASDAQ or CME or CBOE. They just care that their order gets filled, right? and they care that it's the cheapest and fastest to get filled with the best ideally user experience as possible. I look at blockchains very similarly and I think blockchains are a very dangerous bet because you're inherently betting on technology not progressing and you not getting leaprogged by advances in tech. That's what happened to Ethereum.

Ethereum and again I'm not a blockchain researcher. I again I don't really care about layer 1. I think they are commodity businesses. I'm more interested in the frontends that will actually own the user. But you can imagine a user executing through Robin Hood. They have no idea what chain their orders are being routed on. They have no idea what venues their order is even hitting. The or the order could be multipplexed to multiple different venues. It could hit Coinbase and Binance and Hyperlid and a Salana A&M pool and they would have no idea because they are basically just trading and using and thinking about their order execution through Robin Hood. and Robin Hood will not care what blockchain in most purposes will not will power this type of trading. So

these really are just commodity businesses. I don't understand why an AMM is a mo an AMM is a constant product, right? There is nothing revolutionary about putting two equal amounts of an asset into a pool and having it rebalanced. There's no there is nothing inherently that is impressive about this or that is a moat. Um, and if you believe that, you know, uh, chains will get faster and cheaper and potentially more decentralized, then fees should also go down to zero. And people keep saying, well, network effects will make it so that, you know, this chain is valuable and there'll still be a layer 1 premium because, you know, people will want to use Salana or they've solved UX. No, they haven't.

It's the front ends on Salana. It's Phantom Wallet that owns the user. Users don't even really understand if their Salana was wrapped in the back end, right, and then shifted over to another faster, cheaper chain where they got better instantaneous settlement and then when they inevitably make a withdraw or a transfer, then it's unwrapped and transferred back to the chain of origin. There is no way that users will, I think, be voting with their wallet because of a certain type of chain in the back end that they don't even interact with themselves. That's why I think these are commodity businesses and I don't see how it's not a race to the bottom either, right? Like when you have custody over funds, it's a moat because you can enable different types of trading at low cost or no cost

or microloans and other types of you know inter interclient payments and margin lending and capital efficiency usage like blockchains don't really do this right. So anyways, I'll let you guys you know I have pretty strong views on this. This is fundamentally an argument for the the fat app thesis. Mhm. Yeah. Absolutely. Yeah. And and you just have to look across the river at Tradfi and understand that the aggregate market caps of these frontends of Interactive Brokers, Schwab, Fidelity, Vanguard, Robin Hood, Weeble, etc. are larger than CME, NIS, NASDAQ by a factor of 2.5x, 3x. So the value does go to these because they actually own the

customer and you know that's why I think hyperlquid is actually very smart for saying no we don't want to go for the entire pie. We we are fine with someone building a front end users not even knowing that hyperlid is the base clob or liquidity layer and being essentially just the best matching engine and central base of liquidity. You can own the user. You can add additional features and fiat offramps and all this other stuff. We'll let you own those businesses and monetize them and differentiate how you want, but we will be a, you know, commodity business, but we're fine with being the best and most efficient one that lets you monetize, right? And Salana might win the Salana might win, you know, the L1 W. That's fine, but I don't think that that makes

it worth a hundred billion. Innovating finance global institutional and onchain. Deep liquidity to drive capital efficiency. Now maximize yields on institutionalgrade liquid staking with M. Unlock trillion dollars of capital via Fitbitcoin. All of this secured by Mantle's treasury of billions in stables and ETH capital pools. This entire ecosystem is coordinated by a vast network of seasoned VCs that are aiming to create the next generation of banking and financial technology. This is Mantle. Tired of multi-chain headaches?

You need Omni. Omni makes being onchain feel like you're online. Perform any action on any chain in less than two seconds. It's all powered by SolverNet. Omni's breakthrough SDK for crosschain speed, scale, and cost. To kickstart adoption, the Omni Foundation is offering $10 million in rewards for solver powered apps. Start earning today at omni.network. Yeah, that is uh I I appreciate the candid thoughts there because I think that uh you know, if you're going to put the elephant in in the room, you might as well say how you feeling. And and what's important is that you're you know you you're backing this with with in silica with your

personal brand with with your with your investments. And so um I mean this war is going to rage on the Salana people would say otherwise and they would clap back and just you know talk about centralization or talk about um you know lack of an ecosystem etc. uh or different metrics like rev uh ways to value these things. Um, but you know, we can we can save that one for for a different day. Curious more again going deeper into uh Hyperlquid's evolution. You spoke a little bit about builder codes, but I think it's important to understand what builder codes really unlock for the Hyperlid ecosystem. Uh maybe you could just kind of give your thoughts and your take on what builder codes really unlock for Hyperlid.

Yeah, I mean it's very simple, right? So if I had to build for those not familiar with what incilico terminal is we are an execution system where you know financial tooling for it's typically called an MS and order management system or an OEM order execution management system uh to facilitate better trading for free for retail users right basically I mean any user could use it but primarily are our users of retail um we're essentially a reskinned UI for um all of the top venues and we give you access to differentiated order types. So what does that mean? That means TWWAP, VWAP, limit chasing. You can fully customize your UI. So you know it looks

exactly the same and it's uniform across different venues. You can trade on multiple venues at the same time from one consolidated UI. Um and you can imagine most serious traders uh see tremendous benefit from using this type of software. Um it's all completely free. We receive affiliate and broker commissions which is basically like revshare from the exchanges and we don't collect any user data, personal data, PII stops, um P&L orders, anything. Uh because privacy is our our first and foremost focus. Um I I think builder codes what they enable at the core is a way for you to permissionlessly monetize. And that is

important because this is what most blockchains enable and is the reason why um they have I think accumulated quite a bit of trading and speculation and incentivization to build things on top of them as opposed to building it on top of Coinbase or building it on top of Binance. If you were to build some sort of execution tooling, which is basically one of the primary use use cases for builder codes, if you wanted to charge an extra basis point for your Binance customers, you either have to ask permission from Binance and they will tell you no, right? Or you have to find some sort of high friction way to charge the user themselves and settle up a bill. you basically have to invoice

them, which is horrific because imagine you have a losing trading month and then I send you a bill for 30 grand for your execution for that month. You're going to you're you're not going to uh be very happy, right? So that's why we've kept our business free despite being able to charge for it. Um I think it's important for this to be just a a net good like a a general net benefit for most crypto users and we have other plans once we accumulate enough flow. Um, and we want to own all of the execution. But what builder codes enable me to do is if I wanted to, I can charge one basis point or 10 basis points if I thought I could get away with it. And Hyperlid can't stop me, right? And that's never been possible on any clo in history. Like if

you were trading options on Darvit and you built a really cool options trading bot or something or you built really cool analytic software and you had execution bundled in that app, you have no way of charging other than through the gated broker and affiliate programs on centralized exchanges. Most people don't understand this, but you're basically at the mercy of CZ waking up one day, which he has in the past, and saying, "Okay, 50% of your users, you actually can't monetize them anymore." He slashed monetization from V VIP4 to VIP2. So, Hyper uh Binance, excuse me, went from one of our most profitable venues to facilitate trading on to one of our least profitable venues to facilitate trading on, right? And they do this randomly because you're in their

sandbox and it's their right to, right? I mean, it's just business at the end of the day. you don't take it personally, but Hyperlquid is allowing for the first time on derivative trading the ability for you to permissionlessly monetize yourself. And that is incredibly valuable. That's incredibly valuable. And most people don't understand why because they haven't tried to build a product or thought about what monetization looks like. But this will enable and this will this will coordinate people to build exclusively on hyperlquid. Even if drift adds broker codes, even if dydx adds broker codes or or builder codes or some sort of revenue sharing program, they don't have the

user attention and volume. Hyperlid is already too far ahead of them, right? So this will enable products that we haven't even thought of yet and will incentivize that sort of speculation and time exchange for time to build a product because you can actually have some sort of monetization on it in a way that has never been historically possible. Flood, thank you so much for for joining and talking Hyperlid. Just one last thing for you. Um, do we do we think that there's a world where Hyperlid flips Binance in Purpose volume in 2025 or 26 or what's it going to take to get there?

It's impossible for it to flip. Well, not impossible, nothing's impossible, but it's very unlikely that it flips Hyperlid or excuse me, Binance volumes in 2025 just because Binance is such a commanding lead on the swap market. Yeah. Um, and spot and pers go hand in hand. Additionally, um there are some other uh capital efficiency uh things that Binance extends to you due to them being like fully custodial and stuff. Um that enables better capital efficiency and higher rates of leverage for certain market makers. They also, and I don't have any proof of this, but I can imagine that if you're an extremely large trading firm, they'll issue you credit knowing that you have a balance

sheet of a billion dollars or something and they've audited you or something that they can extend a credit of 50 or 100 million. Like Hyperlid will never do that. Like Hyperlid won't even pay 30 grand for their Trading View implementation, right? Like Hyperlid has a strict policy of not paying anybody for anything ever. So, the people that are talking about James Win being marketing, they're they're as far as I know, it's a lot. And I would bet a lot of money that it's a lot. Um, but in 2026, it's entirely possible because Binance is in a really tough spot. They don't do regulated trading better than Schwab or Coinbase does because they're inherently not a US Nexus company. and they don't do you know permissionless trading or or push the boundaries of of finance and and maybe um open up

discourse around you know KYC and permission like Binance is inherently a permission entity with a lot of baggage. So, I think 2026 actually looks looks pretty pretty rough for Binance where in crypto you you get killed when you're in the middle when like why did Ethereum lose to some extent, right? It's because they try to be both Bitcoin and Salana. When you try to do two things mediocre, you typically end up uh atrophying substantially, right? You need to focus on doing one thing the best and then add other types of uh you know edges and and products and features. And that's just pretty standard like first principles thinking. And I think Binance is in a tough spot. So 2026 could look very different. 2025 uh Binance spot market is is the only spot market in the world

other than Coinbases that matters right now. Fud, thanks. Thanks for joining, man. And uh best of luck on your hype journey. We are riding with you and um glad to hear it. It's the only asset that matters in crypto other than Bitcoin. Like it's very simple, you know. It it's very very simple. Nothing else makes money. Speak to you soon, man. Cheers. Thanks a lot.