Hyperliquid (HYPE +0.44%) has been one of crypto's biggest recent success stories. It rounds out the 10 largest cryptocurrencies by market cap, and it's the newest name on that list by far. While most of the top 10 have been around five years or longer, Hyperliquid only launched in November 2024.
The hype behind Hyperliquid comes from its trading platform. It's a decentralized exchange that approaches the performance of a centralized exchange in terms of speed and trading fees, and its value isn't just theoretical. Perpetual futures volumes on Hyperliquid are approaching $200 billion per month.
Despite the impressive numbers, Hyperliquid also has some issues that have kept me from investing in it.
Image source: Getty Images.
Limited decentralization
Hyperliquid is technically decentralized, but it has a small number of validators. The Hyperliquid site lists 30, which pales in comparison to other big blockchains. Ethereum is the gold standard with about 900,000 validators. Cardano has nearly 3,000, and Solana has over 700, to give a few more examples.
When a blockchain has few validators, it increases the risk of a small team exerting too much control. One recent example of the Hyperliquid team using this control was in March 2025, when a trader opened a short position on JELLY, a low-cap meme coin, and then pumped the token's price on other decentralized exchanges.
The Hyperliquid Liquidity Pool inherited the short position and would've been on the hook for substantial losses. At one point, it was down $13.5 million. Hyperliquid's validators voted to manually delist JELLY and close the position at $0.0095, rather than the inflated market price of $0.50.
CRYPTO: HYPE
Key Data Points
This mitigation was a controversial move. Many who invest in crypto believe that "code is law" and that a blockchain shouldn't override existing transactions. Hyperliquid isn't the only blockchain to override an exploit, though; Ethereum famously did the same in 2016. But the move, combined with Hyperliquid's limited number of validators, is a cause for concern.
Security and regulatory risks
Since Hyperliquid is a decentralized crypto exchange, it doesn't have any know-your-customer (KYC) requirements. Traders just need to connect a crypto wallet and deposit USD Coin. That's one of the reasons people like decentralized exchanges, but it also has serious drawbacks.
Bad actors take advantage of the privacy decentralized exchanges offer for illegal activity, such as money laundering. In late 2024, on-chain analysts flagged wallets linked to North Korean hackers trading on Hyperliquid, causing its price to drop over 18%. In 2025, Chinese police were reportedly working on cases of crypto money laundering on Hyperliquid.
Suspected illegal activity and failure to enforce KYC requirements can both draw regulatory attention. To its credit, Hyperliquid announced a $29 million investment in the Hyperliquid Policy Center, which will focus on creating a clear, regulated path for decentralized finance (DeFi) in the U.S. But for the time being, decentralized exchanges are risky.
Not my kind of crypto investment
Hyperliquid has potential. It has done a great job of carving out a niche by focusing on perpetuals trading, and it makes trading activity shareable with its summary card feature, which is a smart way to drive organic marketing from its users.
That said, the validator concentration is a red flag, and I'm not confident in decentralized exchanges as an investment. Many of them briefly surge in value, but fail to maintain their growth, with Uniswap being one notable example. I think the same could be true with Hyperliquid, so I'm staying away.
