Written by: Emily, Bitget Wallet Researcher

While the market is still anxious about the depletion of crypto narratives, HYPE broke through its all-time high of $64.5 , igniting long-dormant on-chain sentiment.

If your understanding of this surge is still limited to conventional "buyback and burn" or "node staking to earn basic returns," then you are undoubtedly underestimating the true power of this financial machine. HYPE's ultimate value lies not in simple governance, but in maximizing "capital efficiency." Throughout the vast Hyperliquid ecosystem, the game of leveraged trading by large investors and whales almost entirely revolves around HYPE. It is this unique underlying leverage engine that has transformed it from a traditional platform token into the super heart supporting the massive liquidity and derivatives hedging loop of the entire HyperEVM.

However, any leveraged engine sustained by whales will inevitably face a liquidity crunch if only funds are circulating internally. For HYPE's capital flywheel to truly "operate," it needs a continuous stream of external fuel: extremely active new retail investors, frenzied trading frequency, and the resulting massive transaction fees. This is precisely the key role played by alt.fun , the dark horse that recently ignited HyperEVM on-chain data. Its emergence completely bridged the gap between retail investor frenzy and the underlying professional derivatives, injecting the strongest momentum into HYPE's explosive growth spiral.

Although the alt.fun craze has subsided, this may not be the first or last hot topic in the Hyperliquid ecosystem. But rather than chasing the next alt.fun, it's more worthwhile to take the time to look back and understand: Why did a platform focused on contract trading suddenly develop a meme culture? Why did alt.fun ignite the HyperEVM chain and even boost the price of tokens across the entire ecosystem? Why can Hyperliquid continuously incubate new gameplay mechanisms? Why has HYPE maintained price elasticity through multiple waves of trending topics?

Let "contract positions" be dressed up as memes

Everyone is familiar with pump.fun's one-click token issuance and Hyperliquid's one-click contract creation. But what if we combined the two? That's the core innovation of alt.fun: pump.fun + Hyperliquid.

The bonding curve doesn't contain SOL (solar power), but rather "leverage".

On the traditional pump.fun platform, people would put SOL into the bonding curve phase in exchange for Meme coins that were essentially worthless.

However, on alt.fun, anyone can issue tokens, but creators have to make an extra choice at the starting line: choose an underlying asset, choose a direction (long/short) and select the leverage ratio (2/3/5x).

This platform currently supports not only crypto assets such as BTC, ETH, HYPE, and SOL, but also traditional cross-asset assets such as silver, Nvidia, and the S&P 500 index.

The so-called Meme Coin on alt.fun is actually a tokenization and fundraising of contract holdings on Hyperliquid . What you are buying is not a piece of meaningless air code, but a joint purchase and holding of a specific leveraged position .

Since the underlying asset is a real contract position, Meme coins possess a real net asset value . For example, a Meme coin called $ALT might be based on a 5x long position in HYPE, raising 10,000 USDC at its initial offering. The following week, there are zero transactions and zero turnover in the community, but HYPE rises by 20%. Therefore, with 5x leverage, the actual return on this position is 100%. The net asset value of this Meme coin increases from 10,000 USDC to 20,000 USDC, even though no one bought or sold it during this entire process.

Of course, leverage is a double-edged sword; the underlying position can also be liquidated, potentially leading to Memecoin going completely to zero. Hyperliquid has taken precautions against this by introducing a dynamic rebalancing mechanism similar to US leveraged ETFs for its BounceTech leveraged token (LT). This mechanism addresses the issue by: once the underlying asset begins to decline, the smart contract will actively reduce its position (cut losses) in the background to forcibly maintain the leverage ratio at a set multiple (e.g., 5x). For example, a token with a 5x long position in HYPE, if HYPE falls by 5%, the actual leverage ratio will passively rise to over 6x, approaching the liquidation threshold. At this point, the system will automatically sell some HYPE perpetual contracts to reduce risk exposure and forcibly pull the leverage back to 5x.

The process works like this: When buying Meme on alt.fun, USDC is exchanged for the underlying leveraged token, and then mapped to Meme coins; the exchange is reversed when selling. Before and after the token's maturity, the corresponding asset reserves always consist of the underlying leveraged holdings. This leads to a counterintuitive phenomenon: even if a Meme coin itself has no community trading activity, its price will fluctuate as long as the underlying underlying contract price fluctuates.

Cross-industry attraction of retail traffic

Due to this inflationary spiral, the new platform triggered a huge FOMO (Fear of Missing Out) sentiment as soon as it was launched.

According to Dune's on-chain data, on its first day of launch, May 15th , alt.fun directly brought 2,441 new interactive addresses to HyperEVM. As of May 26th, alt.fun's average daily transaction volume remained at $3,466,108 USD . For a newly launched ecosystem project, this sustained high turnover rate directly boosted the overall activity of the HyperEVM ecosystem.

From the perspective of user sources, alt.fun has successfully attracted a large number of enthusiastic meme players who cross-link from ecosystems such as Solana and BSC.

However, Hyperliquid has not yet actively promoted alt.fun. This is because these meme retail investors have fundamentally different behaviors from Hyperliquid's existing "trading retail/professional institutions." There is a huge conversion gap in transforming these high-frequency meme traders into contract traders who understand margin and liquidation lines at the underlying level. For Hyperliquid, the true role of alt.fun is to act as a perfect "external blood pump" for its ecosystem.

HyperEVM Ecosystem Analysis: Everything for Trading

It would be a mistake to view HyperEVM merely as a competitor to Ethereum or Solana. In the world of Hyperliquid, there are two core players:

HyperCore (Core Trading Platform): HyperCore is Hyperliquid's self-developed Layer 1 core trading engine (written in C++, incompatible with EVM). Its sole function is to process order book matching, margin settlement, liquidation, and funding rate allocation for decentralized perpetual contracts (PERS) at high speed. It attracts professional traders, market makers, hedge funds, and API bots; over 60% of trading volume is executed via API , with an average monthly trading volume of nearly $10 million per user and an average ARPU of nearly $3,000 per user. Its bottleneck is clear: it lacks the retail investor base of a centralized exchange (CEX).
HyperEVM (Leverage Infrastructure for Transactions): Because HyperCore is too focused on performance, it cannot run complex smart contracts (such as complex meme launches or on-chain games). Therefore, the official team added a HyperEVM layer next to HyperCore.

alt.fun is deployed on HyperEVM, but its true purpose is to drive traffic to HyperCore. Essentially, it repackages professional "leveraged trading" as the retail investor's favorite "buying Dogecoins." Retail investors buy Meme coins on the front end, and alt.fun's smart contract aggregates these scattered USDC into margin on the back end. Based on the token's preset direction and multiplier (e.g., 5x long HYPE), a perpetual contract is opened directly on HyperCore's order book. After the position is established, Meme coins are minted proportionally and sent to the retail investor's wallet. These Meme coins are essentially miniature delivery orders for this contract. Every buy and sell transaction by the retail investor on the front end corresponds to a real contract opening, closing, and dynamic rebalancing on the underlying HyperCore. Every transaction generates USDC fees, which ultimately flow back to HYPE through buybacks or real yield distribution.

Therefore, in terms of user base and "number of active addresses", HyperEVM's retail address count quickly surpassed the number of professional traders in HyperCore, becoming the largest traffic entry point in the entire ecosystem.

Essentially, alt.fun is a "super-sustaining funnel" tacitly approved by Hyperliquid. In this structure, its role is not that of a "product," but rather a retail investor referral layer for HyperCore: making Solana and BSC meme players think they are investing in HYPE, while in reality they are contributing trading volume and fees to the underlying derivatives market. Ultimately, these profits flow back into the market to buy back HYPE, completing a perfect cross-industry capital drain.

Backdoor listing: Where did the liquidity of alt.fun tokens go?

According to Dune data, HyperEVM's TVL has reached $1.6 billion, but shockingly, conventional DEXs (such as HyperSwap) only have a TVL of $15 million. Following conventional logic, a shallow pool means high slippage and difficulty in trading. So how do projects like alt.fun, with their tens of millions of trading volumes, manage to operate?

Many people believe HyperEVM has poor spot liquidity because they only analyze the surface-level buying and selling in the spot pool. To understand the refactored game theory model of alt.fun, we must examine where the funds go after the token graduates:

Traditional Pump.fun model: The raised SOL+ tokens are automatically packaged and sent to regular AMM spot pools such as Raydium. This is an "isolated spot pool," and the depth of liquidity depends entirely on how much money is in the pool itself. If a large investor or a developer dumps the tokens, the pool can instantly go to zero.
alt.fun model (backdoor listing): There are two ways for this type of token to graduate: one is when the bonding curve completes (user funds reach $9,000), and the other is due to a surge in the underlying contract position, causing the total value to directly exceed $9,000 while the number of tokens remains unchanged. Regardless of the triggering method, the graduation action is not "packaging into an AMM," but rather through the underlying protocol, the liquidity is mapped in the form of Mints to HyperCore's perpetual contract order book and spot order book (CLOB), turning it into real buy and sell orders.

In other words, every large buy or sell transaction of this Meme coin by anyone on the front end will cause a change in the amount of LT (leveraged token) in the pool. The BounceTech protocol will then instantly mint or destroy the corresponding LT position in the background.

To illustrate: a traditional DEX pool is like a small village store with only 10 bottles of Coke on the shelf (9,000 USD in liquidity). A large order can cause it to sell out. However, the alt.fun pool, after its development, still superficially has the same 10 bottles of Coke, but behind the counter is a conveyor belt leading directly to the Coke production warehouse (BounceTech Mint protocol). If a whale dumps a $5,000 order, arbitrageurs and the underlying protocol will instantly activate the Mint mechanism, distributing this selling pressure through leveraged tokens as an intermediary, and mitigating it across the perpetual contract order book of BTC, ETH, and HYPE on HyperCore, which has a daily trading volume of billions of dollars.

This means that the alt.fun token doesn't need its own spot pool at all; its counterparty isn't a small pool of retail investors, but rather the margin depth and market maker network of the entire Hyperliquid market. From an on-chain trading experience perspective, its liquidity is virtually unlimited.

HYPE's revolving lending engine

Since the money isn't in the DEX, where is HyperEVM's $1.6 billion TVL? The answer is: over 80% is locked in restaking and lending protocols.

The "backdoor listing" mechanism handles liquidity mapping. Spot DEXs within the HyperEVM ecosystem don't need to compete for funds with lending and staking products. Large sums of money can safely remain in lending and staking protocols to earn real interest. On most public chains, the function of platform tokens is limited to governance and basic staking rewards; however, on Hyperliquid, HYPE's core function is to improve capital efficiency and help large investors leverage their assets.

Taking a large investor with an initial capital of $1 million as an example, a typical looping path is as follows:

Each Looping cycle does two things simultaneously: reduces the circulating supply of HYPEs in the secondary market and amplifies long positions in HYPEs. When HYPE prices rise, the collateral appreciates, the available borrowing amount increases, and the loop can continue to nest upwards. However, its cost is equally direct: when prices reverse, the cascading liquidations triggered by the shrinking collateral value will propagate backwards along the loop path, which is the biggest tail risk for Looping players.

This mechanism also explains the division of labor among various applications on HyperEVM. From retail investor traffic entry points to trading tools and capital amplifiers, the entire ecosystem can be divided into three layers:

The three segments each have their own roles: Kinetiq, HyperLend, and Morpho Blue are the core asset leverage gears, occupying the absolute majority of the capital positions; HyperSwap and papertrade handle daily trading frictions and derivative testing on the periphery; while alt.fun is at the outermost circle, responsible for frantically absorbing retail funds from outside (Solana/BSC), converting them into transaction fees, and continuously injecting real money fuel into HyperCore.

The essence of HyperEVM is to help professional traders amplify capital efficiency through DeFi, and then use the profits to flow back into the market, forming a self-reinforcing right-side surge spiral .

How to seize the next wave of opportunities with HyperEVM?

So, how should ordinary investors plan and mitigate risks when faced with such a behemoth that squeezes "capital efficiency" to the extreme?

Risk Guide for HyperEVM Ecosystem Players

Behind any high level of capital efficiency lie numerous risks, both sides of the coin. When investing in the HyperEVM ecosystem, be sure to keep two points in mind:

Beware of the deadly hidden killer: Dynamic Rebalancing losses . Take the surged leader $ALT on alt.fun as an example (essentially a meme asset of 5x long $HYPE). Many people think that as long as they hold it, they're fine, which is a huge misconception . Because you're holding a contract position, to prevent liquidation, the system frequently performs "dynamic rebalancing" in the background—forced to reduce positions to control risk when the market falls. This means that if HYPE enters a sideways trading range (for example, first falling 10% and then rising 10% back to its original position), because you were forced to reduce your position at the low point, your token's net value will not return to its original point when it recovers, resulting in a serious hidden loss . The higher the leverage, the more severe the sideways trading losses. In extremely volatile one-sided market conditions, there is even a risk that the underlying asset may not have time to rebalance and could be liquidated to zero.

Establish robust risk isolation measures to prevent the spread of liquidation. Since the inner circle operates on a looping lending model, everything prospers when $HYPE surges; however, if the market encounters a black swan event and the underlying asset price experiences a sharp correction, a domino effect of lending liquidations can easily trigger on-chain.

For all on-chain players, going to alt.fun to speculate is about a strong one-sided trend and high volatility, so avoid frequent trading in a volatile market; while conservative players participating in inner-circle DeFi must ensure that there is a sufficient liquidation safety cushion in the lending protocol.

Only by recognizing this new species, born entirely for "derivatives trading," can you truly harness the capital dividends of HYPE.

MLM: TST was not removed from Hyperliquid because validators failed to reach the required quorum for voting.

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