[Short Note] HYPE Unlocks: Priced In or Not? Playbook for Q4

To-date, the first (and only) time we have given guidance on HYPE price was last year on X pre-launch: see here. It may seem silly today, but at the time, popular rhetoric and frameworks benchmarked HYPE closer to being a $2-4 token. We expected higher (a bold ~$8-10… how audacious of us!!), centered around 2 points: 1) the pure-DEX valuation methodology, which was our contemporaries’ consensus, was not the right lens to value this novel platform, and 2) the market was primed in looking for alt-L1s to invest in, given appetite for rebrands (SONIC) and “braggawatts” (this is a tongue-in-cheek phrase used by the energy community when new projects compete for financing by marketing bigger & bigger nameplate capacity) - we use this term loosely here to describe how metrics such as TPS, degree of decentralization (number of validators), etc. were then oft-compared to leverage differentiation in narratives.

We were correct, and since then, have not participated in further ideating on HYPE. The reason is simple - HYPE is very well-covered. Our focus in the Substack is creating clarity in situations that lack precedent, and/or where we believe there is an opportunity to create a return uncorrelated to beta. Meanwhile, HYPE is a beloved token/project by the community, and combined with best-in-class transparency (revenue generated by the platform goes toward buying back HYPE), we have felt that neither our target timeframe (short-medium) nor desired approach (away from a beta overlay) have been suitable toward defining HYPE.

So - what has changed? We think we can “unlock” the unlock math better: through reps provided by the market, participants have been able to practice modelling dollars in. However, there are few pragmatic cases of being able to model dollars “out” - and so we seek to explore this potential edge using theoretical models around elasticity and price impact. We will not spend time here introducing HYPE, and assume that readers know what it is & are caught up to speed regarding the ongoing unlock dynamics at face value.

Herein we will build on two frameworks we have explored in the past - i) target FDV per $1 of BB (BB = buybacks) as observed in our UNI piece here and ii) something we will refer to as the “elasticity of new money (EON).” These concepts are similar in feel - in both cases we attempt to approximate the impact of a dollar. However…