Published on 3 June 2024.

A thesis on $PURR, the memecoin representing Hyperliquid, a soon-to-be launched multi-billion dollar derivatives exchange platform-turned L1.

A note on memecoins

The year of 2024 has seen attention mostly absorbed by memecoins, a narrative that in the past, usually signalled the local top of an overextended period of bullishness. However, it seems to be that memecoins have grown out of their shell of pure degeneracy and are growingly establishing themselves as a method of taking a levered bet on an underlying asset, e.g. $WIF representing the Solana ecosystem and $PEPE representing the Ethereum ecosystem. As such, it seems fairly certain that the memecoin narrative is here to stay for the foreseeable future.

tldr; memecoins are a way to make a levered bet on an underlying asset, they are tokens of representation and act as proxies to an idea / a narrative / another product.

A note on Hyperliquid

From the latter stages of 2023, Hyperliquid was thrust into the derivatives spotlight as a product of the highest quality, perhaps its most echoed compliment being its seamless UX as a decentralised platform, consistently drawing comparisons between CEXs and itself. In just a few months, the platform has already claimed a top spot amongst the perp dex rankings.

Interestingly, many perp dexes achieved their peak trading volumes in the early months of 2024, most likely due to incentive programs and potential airdrops. What was interesting to see was the impact of trading volumes after the conclusion of said programs. Many platforms suffered huge drawdowns of daily traded volumes after the announcements of snapshots and subsequent TGEs, with users receiving airdropped tokens for their usage of the platform and hastily abandoning the platform from the absence of any further future incentives.

We can take AEVO as an example, which reached a peak daily traded volume of approximately ~$4b, but has now dropped to a daily average traded volume of ~$200m.

Surprisingly, despite the conclusion of Hyperliquid’s points program, the platform has maintained strong daily trading volumes, consistently hitting the $1b daily trading volume mark, indicating that users are actually staying to use the product.

How is Hyperliquid’s able to retain its users without incentives?

• As mentioned, the experience of the Hyperliquid platform is one that resembles a DEX.

• Hyperliquid is operating on its own L1 chain and uses its own HyperBFT consensus, making execution and settlement near instantaneous with its theoretical TPS at ~200k.

• The team encourages feedback through its Discord channel and actively fixes bugs and creates new features as requested by the community.

• Their ability to list new trading pairs for perpetuals has been proven to be much faster than its competitors.

tldr; consistently top 2 in derivs sector (by daily volume), user churn not as severe as other derivs platforms post-point campaign.

A note on Hyperliquid’s team

Hyperliquid’s team is a once-in-a-cycle kind of team. An extremely rare case in the space, Hyperliquid has taken in zero investor money. In the current phase of the cycle where we are seeing a push against VC backed projects with low circ + high fdv tokens, this is a team that has gone against the tide and has bootstrapped and built the project from the ground up.

It is clear that the team also follows strict internal guidelines of secrecy and does not endorse insider trading. I believe this is the case because of the absence of price movements on PURR before users realised that they had been allocated points for buying PURR at the end of the first points season.

tldr; chad team, no external investors.

Enter PURR, the Hyperliquid memecoin

At the end of March, Hyperliquid announced that they would begin to support native spot trading, and stated that $PURR, a memecoin, would be the first spot traded token on their platform.

• Fair launched, all tokens were airdropped to point holders pro rata.

• 50% total supply airdropped, 10% used for orderbook liquidity, 40% burned.

• A % of the trading fees from trading PURR is also burned.

Since the launch, a few crucial events have taken place:

• The final week of Hyperliquid’s points campaign revealed that trading / holding PURR rewarded users with a large amount of points, boosting the valuation of PURR by ~50%.

• Hyperliquid recently enabled permissionless spot deployment, users are able to bid against each other to win an auction every 31 hours to reserve a ticker and launch on Hyperliquid’s spot trading platform.

• Hyperliquid announced another season of points, as they look to pivot their previous vision of becoming the largest perp dex to becoming a fully operational L1 with its own consensus mechanism.

What does this mean for $PURR?

The sequence of events that have unfolded in the past month have suddenly converted PURR from being any other memecoin to representing something much bigger. I believe PURR trading at $90m will be looked back on as incredibly undervalued. I believe this for the following reasons:

(1) PURR remains the only legitimate proxy for betting on an aggressively growing L1.

• On May 17th, I personally suggested my fund to begin purchasing PURR. I believed the excitement surrounding Hyperliquid meant that PURR as a proxy provided an extremely attractive r/r. I did however, mention a key invalidation thesis - which was the actual launch of Hyperliquid’s official governance token ($HYPER is my guess of the ticker). Slack receipt shown below:

• Hyperliquid announcing a new points season that will carry on for 4 more months essentially eliminates my biggest concern regarding PURR. Whereas previously there was uncertainty surrounding the longevity of PURR, the new points season all but confirms that PURR will remain the only proxy for 4 more months. This is extremely bullish.

• As previously mentioned, large cap memecoins are being used to represent their respective chains. SOL - WIF & BONK, ETH - PEPE, Base - BRETT, TON - NOT. On average, the largest memecoins represent around 3-6% of their respective chains. With the amount of anticipation leading up towards the official launch of Hyperliquid, I wouldn’t be surprised to see Hyperliquid launch at around a 5-7b valuation. If we believe Hyperliquid launches at a base estimate of 6b, and PURR represents a 5% valuation of the L1’s FDV, then we can expect PURR to be worth at least 300m, a 3x from its current valuation.

(2) Buying / holding PURR will likely lead to points in the L1 points season for Hyperliquid

• Despite not releasing concrete criteria of how points would be accumulated in the new season, buying / holding / trading PURR will very likely lead to points accrual in the coming weeks. With their perps platform already becoming a main tool for perp traders, it only makes sense that the team is trying to incentive people to use their spot trading platform more. As such, I believe buying and holding spot tokens (not only PURR) will mean points. However, PURR being the largest and most liquid token will be the first thing that new users come to purchase, driving up the price.

(3) PURR has similarities to the craze of TIA airdrops

• At the beginning of this bull cycle, there was a growing consensus that staking TIA would provide yield through future airdrops. Apart from Altlayer and Dymension, this didn’t prove to be the case, and everyone left staking TIA is still waiting for a return on their locked capital.

• PURR on the other hand, is experiencing a similar situation, except the airdrops are actually proving true. All but two permissionless spot deployments on Hyperliquid have allocated a large percentage of airdrops to PURR holders as a way to bootstrap attention to the newly launched spot tokens. There are currently 10 spot tokens other than PURR, and airdrops have already accumulated to become ~6% of a user’s PURR holdings. This is only going to continue growing.

tldr; PURR remains the only proxy for HL in next 4 months, buying + holding PURR likely to give points for new points season, user-deployed spot tokens being airdropped to PURR holders.

Current price for PURR: $0.156, 93m mcap

Bear case ($0.156, 93m): Buying / trading PURR leads to no points accrual, PURR simply becomes a Hyperliquid proxy and nothing else. Price trades sideways until TGE.

Base case ($0.5, 297m): Buying / trading PURR leads to points accrual (highly likely), PURR becomes a proxy + a way of accruing points + accumulating spot deployed airdrops.

Bull case ($0.83, 493m): Airdropped tokens surge in value as Hyperliquid L1 becomes a new destination to trade permissionless spot deployed tokens as people favour the instant settlement experience. Airdrops become larger and larger to PURR holders. Excitement for Hyperliquid L1 launch reaches peak euphoria, PURR remains the only way to bet on this hype until TGE.