Hyperliquid's HYPE Surges 20% as Prediction Markets Launch

Hyperliquid's native token HYPE surged over 20% Tuesday as the decentralized exchange unveiled plans to enter the booming prediction markets sector, positioning itself as a potential competitor to industry leaders Polymarket and Kalshi.

The rally came after Hyperliquid announced HIP-4 (Hyperliquid Improvement Proposal 4) on Monday, introducing "Outcomes"—a new contract type that enables fully collateralized prediction markets and options-style derivatives without leverage or liquidation risk.

HYPE climbed to $37.22 as of Tuesday afternoon, extending gains that have seen the token rise over 50% in the past week and 85% from its January lows. The performance stands in stark contrast to the broader crypto market, where Bitcoin continues struggling to regain footing following its weekend decline to $74,662.

HIP-4 Introduces Prediction Trading

The new Outcomes feature represents Hyperliquid's expansion beyond its core perpetual futures business into the rapidly growing prediction markets space, which has attracted billions in trading volume through platforms like Polymarket and Kalshi.

According to Hyperliquid's official announcement, Outcomes are fully collateralized contracts that settle within a fixed price range. The platform emphasized that these instruments introduce "non-linearity, dated contracts, and an alternative form of derivative trading that does not involve leverage or liquidations."

Unlike traditional leveraged derivatives that can trigger forced liquidations when prices move against traders, Outcomes require full collateral upfront. This means participants know their maximum potential loss at the time of entry, eliminating the cascading liquidation events that often amplify crypto market volatility.

The feature is currently live on Hyperliquid's testnet, with mainnet deployment planned once technical development is complete. The team said initial markets will be curated and based on objective settlement sources, with potential expansion to permissionless deployment depending on user feedback.

Volume Explosion Drives Rally

HIP-4's announcement follows explosive growth in Hyperliquid's HIP-3 permissionless markets, which processed over $12 billion last week—up from $3.75 billion the previous week, a 220% surge. Total cumulative volume has reached $216 billion, with daily trading hitting $11.7 billion.

Network fees jumped to $75 million in January from $68 million in December. Open interest climbed to $6 billion, significantly outpacing competitors like Aster ($2.08 billion) and Lighter ($1.1 billion).

The protocol has bought back $55.6 million worth of HYPE in the last 30 days and burned over 580,000 tokens, with a proposal to burn 13% of total supply under consideration.

Decoupling From Bitcoin Weakness

HYPE's strong performance is particularly notable given the broader crypto market's struggles. As Bitcoin remains under pressure and institutional analysts debate whether the bear market is approaching its final innings, HYPE has emerged as one of the few tokens gaining ground.

The token was the top performer in Tuesday's DeFi sector rally, posting 19.85% gains while the overall DeFi category advanced just 3.53%. Analysts have described HYPE as functioning more like a "high-growth utility stock than a speculative digital asset," pointing to its revenue generation and cash flow characteristics.

Hyperliquid's Total Value Locked (TVL) has climbed to $1.5 billion even as TVL declines across many other DeFi protocols. The platform's ability to grow fundamental metrics while the broader market contracts has led some observers to characterize it as a "defensive play" in the current environment.

Entering a Competitive Market

The timing aligns with growing mainstream interest in prediction markets. CFTC chairman Michael Selig said last week the agency is preparing new rules for the sector, as Polymarket and Kalshi attract billions in activity. Polymarket recently re-entered the US market with CFTC approval, while Kalshi operates in all 50 states via a Coinbase partnership.

Hyperliquid's fully on-chain, collateralized approach could differentiate it from existing platforms. While Polymarket functions as a social prediction market and Kalshi focuses on regulated contracts, Hyperliquid's integration with derivatives infrastructure and HyperEVM could attract sophisticated traders seeking composable DeFi primitives.

Technical Outlook and Risks

HYPE has formed a double-bottom pattern at $22.32, recently breaking above the neckline at $28.26. The token trades above both its 50-day and 100-day EMAs with an RSI at 62.82—indicating momentum without overbought conditions. Immediate resistance sits at $42.

However, 9.92 million HYPE tokens ($254.6 million) unlock February 6 for core contributors, potentially creating near-term selling pressure. Additionally, HIP-4 remains on testnet with no confirmed mainnet date, meaning the rally reflects anticipation rather than current utility.

What's Next

If HIP-4 successfully launches on mainnet and attracts meaningful volume, it could significantly expand Hyperliquid's addressable market. The integration with existing infrastructure—portfolio margin and HyperEVM—could enable sophisticated strategies combining prediction markets with perpetuals.

Market participants are watching whether Outcomes can replicate HIP-3's success. In an environment where most crypto assets struggle, Hyperliquid's ability to grow fundamentals while expanding into new verticals has set it apart.

Data Sources: CoinMarketCap, CoinDesk, Invezz, Hyperliquid