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Hyperliquid's Rising Popularity and Entry Barriers: Addressing Institutional Participation and Retail Appetite in Liquid Restaking Derivatives

Hyperliquid's Rising Popularity and Entry Barriers: Addressing Institutional Participation and Retail Appetite in Liquid Restaking Derivatives

Bitget-RWA2025/11/18 12:32
By:Bitget-RWA

- Hyperliquid's 2025 retail-driven growth surged via token airdrops and buybacks, reaching $2.15B TVL and 70% perpetual futures market share. - Institutional adoption faces barriers from token dilution risks (10.8B HYPE unlock) and regulatory challenges after $4.9M POPCAT token manipulation losses. - Strategic innovations like HIP-3 and 21Shares' ETF proposal aim to attract institutional capital despite competition from Aster and BNB Chain platforms. - Platform's success hinges on balancing retail momentum

Hyperliquid, a decentralized derivatives exchange, has quickly established itself as a major player in the crypto landscape in 2025, fueled by strong retail participation and creative tokenomics. Yet, its swift rise is tempered by institutional reluctance and ongoing regulatory ambiguity, especially in the rapidly expanding but still developing area of liquid restaking derivatives. This report explores the factors influencing Hyperliquid’s path, with an emphasis on the tension between retail enthusiasm and institutional constraints.

Retail Demand: Driving Expansion

Hyperliquid’s growth, powered by retail users in 2025, has been remarkably rapid.

-which distributed 31% of $HYPE tokens to 90,000 wallets—sparked significant user participation. Alongside this, the Assistance Fund , buying back 28.5 million tokens valued at $1.3 billion in July 2025 alone. These actions , securing 70% of the on-chain perpetual futures sector.

Interest from retail investors in liquid restaking derivatives surged further in Q3 2025, as

—outpacing the total OI of all other decentralized perpetual platforms. Retail traders utilized up to 20x leverage on and positions, with . Innovations such as the HyperEVM , highlighting the platform’s appeal to retail users seeking liquidity.

Institutional Entry Barriers: Tokenomics and Regulatory Issues

Despite its popularity among individual traders, Hyperliquid encounters notable obstacles in attracting institutional investment. Its tokenomics structure is a primary concern.

over two years has sparked worries about price volatility and dilution, leading to an 11.2% drop in institutional market share. Additionally, from November 2025 through 2027 further undermines investor trust.

Regulatory hurdles have also become a significant challenge. In late 2025,

, where attackers artificially inflated the price using $3 million in to trigger mass liquidations. The community-run liquidity vault (HLP) , revealing weaknesses in the platform’s risk controls. This mirrors an earlier 2025 incident involving JELLYJELLY, where . Such cases underscore the necessity for stronger protections to satisfy institutional requirements for safety and transparency.

Strategic Developments and Institutional Outlook

Nonetheless, Hyperliquid’s prospects with institutions are not without potential.

, which allows for permissionless market creation through HYPE token staking, has diversified both revenue and liquidity sources. with Hyperion DeFi and Felix, are designed to broaden the platform’s offerings. Furthermore, indicates rising institutional interest.

, with part of the funds used for HYPE token buybacks and treasury expansion, has helped reduce selling pressure and improve investor sentiment. Still, competition from rivals like and Chain-based platforms remains intense, especially as they offer aggressive trading rewards.

Conclusion: Navigating Growth and Risk

Hyperliquid’s journey in 2025 illustrates the fine line between rapid retail expansion and institutional caution. While its inventive tokenomics and technological progress have drawn strong retail interest, unresolved issues—such as token dilution and regulatory risk—continue to hinder broader institutional adoption. To cement its role in the DeFi sector, Hyperliquid must strengthen its risk management and ensure transparent governance. Investors should carefully consider the platform’s impressive growth prospects alongside its exposure to market and regulatory uncertainties.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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