Hyperliquid Drops HIP-4: Outcome Trading Is Here and HYPE Traders Are Watching Closely

Hyperliquid’s HIP-4 Upgrade Sparks 20% Rally in HYPE as Prediction Markets Enter the Network

The price of HYPE surged nearly 20 percent after Hyperliquid confirmed details of its HIP-4 network upgrade, signaling a strategic expansion beyond perpetual futures trading. The move positions Hyperliquid to enter the fast-growing prediction markets sector, adding a new layer of utility to its Layer-1 blockchain.

Market participants reacted swiftly to the announcement, pushing HYPE to around $37.75 at the time of writing. The rally was accompanied by a sharp rise in trading volume and market capitalization, reflecting renewed confidence in the protocol’s long-term growth narrative.

The HIP-4 upgrade represents one of the most ambitious steps taken by Hyperliquid since its emergence as a dominant force in on-chain derivatives, suggesting that the platform aims to compete not only in leveraged trading but also in event-based decentralized finance.

From Perpetual Futures to Outcome-Based Trading

Hyperliquid has built its reputation on high-performance perpetual futures trading, offering users fast execution, deep liquidity, and on-chain transparency. With HIP-4, the protocol expands into “outcome trading,” allowing prediction markets to be built directly on its Layer-1 infrastructure.

Source: X Official

Unlike perpetual contracts that rely on leverage and liquidation mechanisms, the new prediction markets introduced under HIP-4 are fully collateralized. This design removes leverage risk entirely, meaning users cannot be liquidated due to price swings. Instead, contracts settle based on predefined outcomes within a fixed time frame.

Developers will be able to create markets that allow traders to speculate on a wide range of events, including cryptocurrency price movements, macroeconomic developments, and other real-world scenarios that can be objectively resolved.

How HIP-4 Prediction Markets Work

Under the HIP-4 framework, third-party developers are granted permissionless access to deploy prediction markets on Hyperliquid’s blockchain. These markets are structured around simple yes-or-no outcomes or more complex options-style contracts with fixed expirations.

Because contracts are fully collateralized, participants know their maximum potential loss upfront. Profits and losses do not scale linearly with price movement, making these instruments fundamentally different from leveraged derivatives.

Industry analysts describe this model as a hybrid between traditional prediction markets and decentralized options trading, offering users exposure to advanced strategies without the liquidation risks associated with high leverage.

Competing With Established Prediction Market Platforms

Hyperliquid’s expansion places it in direct conceptual competition with platforms such as Polymarket, which has become one of the most widely used on-chain prediction markets in the crypto ecosystem.

While Polymarket focuses primarily on event-based betting using simple binary outcomes, Hyperliquid’s approach integrates prediction markets into a broader derivatives-focused ecosystem. This allows traders to access multiple financial instruments within a single protocol, potentially increasing capital efficiency and user retention.

Analysts note that combining derivatives trading with prediction markets could attract a more sophisticated user base, including traders seeking alternatives to leveraged positions during periods of heightened volatility.

Immediate Impact on HYPE Token Metrics

The market response to the HIP-4 announcement was swift and measurable. HYPE’s price climbed nearly 20 percent within hours, pushing its market capitalization to approximately $11.38 billion. Daily trading volume surged by more than 40 percent, reaching roughly $1 billion.

Source: CoinMarketCap Data

On-chain data shows increased activity across the network, suggesting that traders and developers are positioning themselves ahead of the upgrade’s full deployment. The rally reflects expectations that new use cases will drive higher demand for the HYPE token, which plays a central role in staking, governance, and ecosystem participation.

Some market observers believe that if adoption of HIP-4 prediction markets accelerates, HYPE could test the $50 level in the near term. However, they caution that broader market conditions and user engagement will ultimately determine whether the momentum can be sustained.

Testnet Live, Mainnet Upgrade on the Horizon

The HIP-4 upgrade went live on Hyperliquid’s testnet in early February 2026, allowing developers to begin experimenting with prediction market deployments. A mainnet release is expected after testing and validation are completed.

As with previous upgrades, builders are required to stake 500,000 HYPE tokens to deploy markets, ensuring economic alignment and discouraging low-quality or malicious deployments. This mechanism mirrors the framework used in HIP-3, which focused on liquidity and risk-sharing innovations.

HIP-3 played a significant role in driving billions of dollars in trading volume across Hyperliquid markets, and the team appears to be applying similar design principles to HIP-4 in an effort to replicate that success.

Why Prediction Markets Are Gaining Momentum

Prediction markets have seen renewed interest across the crypto industry due to their ability to aggregate information in a decentralized and transparent manner. By allowing participants to express views on future events using financial incentives, these platforms often produce accurate forecasts without relying on centralized intermediaries.

Major players have taken notice of this trend. In late 2025, Coinbase introduced its own prediction market-style features, signaling institutional recognition of the sector’s growth potential.

Hyperliquid’s entry into this space underscores a broader shift toward diversified DeFi platforms that offer multiple financial primitives under one roof.

Balancing Innovation and Ethical Concerns

Despite their popularity, prediction markets are not without controversy. Critics argue that betting on sensitive or emotionally charged events could raise ethical questions, particularly if markets are perceived as exploiting real-world crises or personal tragedies.

Hyperliquid has not yet detailed specific content guidelines for prediction market creation, but industry experts suggest that governance mechanisms and community oversight will play an important role in shaping acceptable use cases.

As the sector grows, balancing innovation with responsible design is likely to become an increasingly important challenge for platforms operating in this space.

What This Means for Hyperliquid’s Long-Term Strategy

The HIP-4 upgrade highlights Hyperliquid’s ambition to evolve from a specialized derivatives exchange into a comprehensive on-chain financial ecosystem. By supporting both leveraged trading and fully collateralized outcome markets, the protocol broadens its appeal to different risk profiles and trading styles.

Analysts believe this diversification could help stabilize revenue streams and reduce reliance on perpetual futures volume alone. If prediction markets gain traction, they could become a meaningful contributor to network fees and token demand.

However, sustained success will depend on developer adoption, user education, and the ability to maintain high performance as the network’s complexity increases.

Market Outlook and Risk Considerations

While the recent rally reflects strong optimism, market participants are reminded that price movements driven by upgrade announcements can be volatile. Profit-taking, broader market sentiment, and execution risks may all influence short-term performance.

Longer-term valuation will hinge on measurable adoption metrics, such as the number of active prediction markets, total value locked, and transaction volume generated by HIP-4.

For now, the upgrade has clearly energized the community and reinforced Hyperliquid’s reputation as one of the most innovative platforms in decentralized derivatives.

Conclusion

Hyperliquid’s HIP-4 upgrade marks a significant milestone in the protocol’s evolution, opening the door to prediction markets and outcome-based trading on its Layer-1 blockchain. The announcement has already driven a sharp increase in HYPE’s price and trading activity, reflecting market confidence in the platform’s expanding utility.

As testing continues and a mainnet launch approaches, attention will shift from speculation to execution. Whether HYPE can sustain its momentum toward the $50 level will depend on how effectively Hyperliquid translates technical innovation into real-world adoption.

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Writer @Erlin
Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.
 
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