Altseason Divergence Trades: HYPE vs SUI, Ethena vs Circle

10/09/2025 admin

TL;DR:

They say it’s not how much you make in an altseason, but how much you keep. While others chase the next big pump, the smartest traders focus on risk and cycle winners. This guide reveals a different game: a market-neutral strategy designed to generate pure alpha by exploiting fundamental mismatches.The goal is to isolate alpha by going long on fundamentally strong assets with clear catalysts and shorting their overvalued or structurally weak counterparts.

This approach minimises exposure to broad market movements or macro risks, unrelated to the crypto market.

Trade 1: The Value Play. Long $HYPE / Short $SUI.
- This is a bet on a proven, cash-flow-positive protocol with a powerful token buyback mechanism against a VC-backed project struggling to find strong product-market fit and long-term token inflation over other L1s.
Trade 2: The Stablecoin Model Divergence. Long $ENA / Short $CRCL (Circle).
- This is a bet on a crypto-native stablecoin model with unprecedented, structural buy-side demand against a TradFi-bridged model, whose primary revenue stream is highly dependent on third party distribution channels, unsustainable subsidies, and directly threatened by both macroeconomic shifts and targeted competition.

Trade 1: Long $HYPE, Short $SUI

In our view, this trade capitalises on a striking valuation disparity: while $SUI and $HYPE share a similar market cap, $HYPE demonstrates superior product-market fit with massive on-chain revenue and a thriving community-owned ecosystem. $SUI on the other hand, struggles with limited adoption and faces substantial headwinds from its heavy reliance on subsidies and token unlocks from VCs.

The Long Case: Hyperliquid ($HYPE)

Big, Real Revenue: Hyperliquid is a cash-generating machine. It booked a record $106 million in revenue in August 2025 alone, a 23% increase from July. Its annualised revenue is tracking at over $1.25 billion.
The “HYPE Flywheel”: This is the core of the thesis. The protocol automatically uses 97% of all trading fees to buy $HYPE tokens on the open market. This creates relentless, structural buy pressure that is directly tied to platform success. The fund dedicated to this has already accumulated nearly 30 million $HYPE tokens, worth over $1.5 billion.
Powerful Moat: Hyperliquid isn’t just a player; it’s the market leader, capturing 70-75% of the entire decentralised perpetuals market. This creates a powerful moat.
Near-Term Catalyst (USDH Stablecoin): The platform announced the launch of its own stablecoin, $USDH. Stablecoin issuers are in a bidding war to manage the upcoming product, with leading proposals committing to use 95% of the interest from reserves for more $HYPE buybacks. This adds another powerful jet engine to the $HYPE flywheel.
Grassroots vs. VCs: Hyperliquid had no VC funding – they focused on building a loyal community through big airdrops to early users. This aligns incentives perfectly, unlike VC-heavy projects.

The Short Case: Sui ($SUI)

The VC Overhang: Sui raised $336 million from VCs like a16z, Binance Labs, and the now-defunct FTX Ventures. This created a massive supply overhang.
Quantifiable Unlocks: The next major unlock is on 1 October 2025, releasing an estimated $187 million worth of $SUI into the market. Historically, $SUI’s price has shown weakness around these events, dropping 8% after the February 2024 unlock.
Inefficient Value Accrual: Unlike $HYPE’s direct buybacks, value accrues to $SUI holders indirectly through gas fees and staking rewards. This is a much weaker and more diffused mechanism, especially when fighting against constant supply dilution.
Ecosystem & Adoption Challenges: Sui faces significant adoption hurdles beyond just security concerns. The $200 million+ Cetus DEX hack in May 2025 severely damaged institutional trust, but more importantly, the project is struggling in an increasingly crowded L1 landscape. New competitors including Plasma, Stripe’s L1 Tempo, Robinhood’s L1, and others are capturing mindshare and user activity that Sui had hoped to secure, making its path to meaningful adoption increasingly uncertain.

Trade 2: Long $ENA, Short $CRCL (Circle)

This trade pits a disruptive, crypto-native stablecoin model against a publicly traded, TradFi-bridged incumbent facing a perfect storm of headwinds.

The Long Case: Ethena ($ENA)

Structural Token Demand: This is the main event. A dedicated DAT stock is not rare, but providing transparency on price levels and buying from the open markets is rare. StablecoinX is in the process of a SPAC merger to list on Nasdaq (ticker: USDE). It has raised a staggering $890 million in PIPE financing from top-tier institutions like Brevan Howard and the family office of Binance’s founder. Its sole mandate is to accumulate $ENA tokens.
The Fee Switch Catalyst: A major upcoming catalyst is the activation of Ethena’s “fee switch,” which will distribute a portion of the protocol’s massive revenue stream to $ENA stakers (sENA holders). Ethena’s revenue is substantial, exceeding $61 million in August alone. The activation is tied to a five-part governance framework, of which four conditions have already been met, including $USDe supply surpassing $6 billion and protocol revenue exceeding $250 million. This switch will transform $ENA from a pure governance token into a yield-bearing asset directly tied to the protocol’s success
Parabolic Growth: Ethena’s synthetic dollar, $USDe, is the fastest-growing stablecoin in history, surging to a $12.6 billion supply in under 10 months. This demonstrates incredible product-market fit.
Crypto-Native Business Model: Ethena’s yield is generated from on-chain activities (staked ETH yield + perp funding rates), making it more resilient to the macroeconomic interest rate cycles that threaten Circle.

The Short Case: Circle ($CRCL)

Interest Rate Dependency: Circle’s business model is a one-trick pony. In 2024, over 99% of its revenue came from interest earned on its reserves. In Q2 2025, it was still over 96%. This makes its entire business model highly vulnerable to Federal Reserve policy.
Headwind 1 – Impending Rate Cuts: Market consensus points to impending interest rate cuts. The impact is direct and severe: analysts estimate a 1% cut in rates would slash Circle’s annual revenue by $618 million, a 23% drop.
No Real Moats: Hyperliquid’s upcoming plan to launch its own $USDH stablecoin is a direct attack on Circle’s revenue. Hyperliquid currently holds ~$5.4 billion of $USDC, representing about 8% of the entire circulating supply. A successful migration of this collateral to $USDH is estimated to create a $100 million to $220 million annual revenue loss for Circle—a potential 10% hit to its entire business from a single competitor’s move.
High Distribution Costs & Margin Compression: Circle has costly revenue-sharing agreements with partners. It gives Coinbase 100% of the interest income on USDC held on-platform and 50% for off-platform holdings. These payouts severely limit its ability to scale profitability.

The Bottom Line (and a Risk Reminder)

The above pair trades are designed to capture alpha by exploiting fundamental mismatches in the market.

The $HYPE/$SUI trade is a bet on superior, cash-flow-driven tokenomics outperforming a VC backed blockchain with lack of real users.
The $ENA/$CRCL trade is a bet on a disruptive crypto-native model with massive structural demand against a legacy-bridged incumbent facing clear threats to its core business.

Disclaimer: This is not financial advice. Pair trading is a complex, high-risk strategy intended for experienced traders. All trading involves substantial risk of loss. Key risks include, but are not limited to: market volatility breaking correlations, smart contract exploits on the long positions ($HYPE, $ENA), regulatory changes impacting either side of the trade, and execution risks like high liquidations for positions. Always conduct your own thorough analysis before entering any trade.

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