It's not just the prediction market that profits from the Iraq War

Written by: Eric, Foresight News

At the end of February 2025, the situation in the Middle East suddenly escalated. The United States and Israel launched large-scale airstrikes against Iran, shaking global financial markets.

During a weekend of ongoing conflict, while traditional financial markets were closed and Wall Street traders anxiously awaited Monday's opening, another wave of investors was trading frantically on blockchain platforms.

They were not trading cryptocurrencies; they were trading gold, crude oil, and silver.

Prediction markets like Polymarket and Kalshi saw a surge in trading volume due to war-related contracts, becoming the focus of the market. On the other side of the lens, perp DEXs, including Hyperliquid, also "made a fortune from the war": the trading volume of commodity contracts on the platform soared, and on-chain derivatives of traditional assets like gold, crude oil, and silver experienced an unprecedented liquidity explosion.

The War Dividend of Prediction Markets

Before delving into perp DEXs, it is necessary to review the performance of prediction markets during this geopolitical crisis. After all, it was the impressive data from Polymarket and Kalshi that made people truly feel that the era of "everything can be bet on" has arrived.

According to data from Dune Analytics, as of the week of March 1, 2025, traders placed bets totaling $425.4 million on geopolitical issues on Polymarket, far exceeding the previous week's $163.9 million. The total trading volume on the platform reached a record $2.4 billion, significantly up from $1.8 billion the week before. Kalshi also performed well, with its contract on "Will Khamenei step down?" attracting over $54.5 million in trading volume.

Behind these numbers is the strong stimulation of trading desire among platform users due to the globally recognized event of war. When missiles tore through the night sky of Tehran, and when Trump announced on social media that "Khamenei is dead," the price curves in prediction markets reflected the "truth" faster than any news release.

However, it should be clear that "making a fortune from war" here is not a pejorative term. Prediction markets provide an unprecedented way for people to express their judgments on major events with real money. As Kalshi CEO Tarek Mansour said, the essence of these platforms is to "make uncertainty priceable," and war has merely pushed this pricing demand to its extreme.

"Crazy Saturday" on Hyperliquid

Prediction markets are undoubtedly the direct beneficiaries in the Web3 space due to the war, but another somewhat "outdated" track has also opened the door to a new world because of this conflict.

On March 1, the day after the official outbreak of the US-Iran war, Iran acknowledged that Supreme Leader Khamenei had died in the conflict. On that day, after a brief drop, the cryptocurrency market quickly rebounded, with Bitcoin's intraday volatility slightly exceeding 7%, which was not particularly dramatic.

As it was the weekend, most people's focus remained on cryptocurrencies, as they viewed cryptocurrencies as the only "commodity" that could be traded without restrictions on weekends, but the reality had long since changed.

Bloomberg reported on March 1 that on the first day of the war, which was also a Saturday, the price of perpetual contracts for oil on Hyperliquid rose about 5% to $70.6 per barrel, while the prices of gold and silver perpetual contracts rose approximately 1.3% and 2% to $532.3 and $94.9 per ounce, respectively. The trading volume of silver futures exceeded $227 million within 24 hours, while gold futures trading volume was about $173 million.

The trading market for perpetual contracts of gold, silver, and crude oil was already launched on Hyperliquid's largest HIP-3 market trade.xyz by the end of 2025 and early 2026. Moreover, February 28 was not the peak of daily trading volume; on January 29, when silver hit a historical high of $120 per ounce, the single-day trading volume of silver contracts on Hyperliquid exceeded $1.2 billion, and on February 5, this figure was further refreshed to over $3.5 billion, accounting for 68% of the total trading volume in the HIP-3 RWA market that day.

Crude oil, which made its debut on the on-chain market, also performed impressively.

Before the outbreak of the conflict, the average daily trading volume of crude oil contracts on Hyperliquid was only about $20 million. After the war broke out, as crude oil prices continued to rise, the daily trading volume of crude oil contracts on Hyperliquid quickly surpassed $100 million. On March 9, this figure even approached $2 billion, only lower than the trading volume of Bitcoin contracts on the platform, and far exceeding Ethereum's volume.

According to Flowscan data, on March 8, the trading volume of the Hyperliquid HIP-3 market exceeded $880 million, setting a historical record for weekend trading volume. Just a week later, this number was refreshed to nearly $966 million.

The ample liquidity over the weekend not only provided investors with a place where "money never sleeps" but also brought a better pricing mechanism to traditional financial markets. Arete.xyz's managing partner stated on X that this was the first time a decentralized platform achieved price discovery for traditional assets.

As trading continued to develop, traders would no longer need to be flustered when the market opened on Monday. Perhaps they had already completed their trades on Hyperliquid over the weekend, or perhaps the opening prices were very fair, leaving little room for arbitrage.

Of course, it wasn't just on-chain platforms eyeing this lucrative opportunity.

Who is Watching?

Major exchanges also sensed the business opportunity early on.

Familiar exchanges like Binance, OKX, and Bitget had already launched RWA tokenized assets. OKX launched perpetual contracts for gold as early as May last year, while Binance and Bitget did so in December.

Exchanges may not have paid much attention to these assets in the past, possibly due to their low volatility, with "investment" attributes outweighing "trading" attributes, failing to catch regulatory eyes. However, with Trump capturing Maduro and then decapitating Khamenei, the volatility of major assets like gold, silver, and crude oil rivaled that of former altcoins, while today's altcoins have long since fallen silent.

Cryptocurrencies are struggling, while traditional financial markets are celebrating every day, which would make anyone envious. Cryptocurrency exchanges inherently do not have trading halts, and the markets for the major assets they list do not involve any delivery, trading "air" just like altcoins, adding one more to the mix.

Not only cryptocurrency exchanges, but also the sanctuaries of global quality assets: Nasdaq and the New York Stock Exchange are equally unwilling to give up pricing power over commodities.

As early as last year, Nasdaq and the NYSE hinted to the market that they not only wanted to explore security tokenization but also aimed to support 24/7 trading. However, it is evident that traditional institutions find it challenging to take this step; if they want to change rules that have lasted for a century, both upstream and downstream must adapt: Who will provide liquidity? Who will clear? Can T+0 be achieved? These are all pressing questions.

Specific details are still hidden under the table. But this month, Nasdaq announced a partnership with the US-based cryptocurrency exchange Kraken's xStocks, while the parent company of the NYSE, ICE, officially announced a $25 billion investment in OKX. Clearly, they do not want to relinquish the territory they have fought for, and the arrow is already on the string, waiting for the command to launch.

On the second weekend of March, Bloomberg reported again on Hyperliquid's commodity trading data, and this consecutive reporting in a short period made many sensitive individuals feel a change: a platform that profits from data and information began to pay attention to on-chain exchanges and used their commodity trading prices as a reference. But this also raises another question: why did the leading cryptocurrency exchanges, which woke up early, not trigger such high attention for Hyperliquid?

Taking the silver perpetual contract as an example, on March 9, the trading volume of the XAGUSDT contract on Binance was $6.464 billion, while on Hyperliquid it exceeded $3.5 billion. Although from the numbers alone, Hyperliquid's trading volume in this single market was only 54% of Binance's, Binance's user base has surpassed 300 million, while Hyperliquid's total user count is only close to 1.7 million.

Winners Take All

According to statistics from cryptocurrency asset research firm ASXN, Hyperliquid's total trading volume exceeded $8 trillion (other data sources report $4 trillion, possibly due to ASXN double counting the trading volume of both parties), with accounts trading over $1 billion accounting for 76% of the total trading volume, and accounts trading between $100 million and $1 billion accounting for 16% of the total trading volume.

Hyperliquid does not have specific market maker accounts; many accounts with trading volumes reaching hundreds of billions should be controlled by market makers. Even so, the 76% figure is enough to prove that most users trading on Hyperliquid are actually whale investors. Although the overall volume may not match that of CEXs, the prices at which whales trade silver are indeed more valuable as a reference.

However, this still does not answer why the market unanimously chooses and favors perp DEXs. I previously organized the views of Chinese users on perp DEXs in an article titled "Choosing Perp DEX is a Rebellion Against 'The World Has Suffered Under Qin for Too Long'," and not many people said that CEXs were doing poorly; rather, the shift to DEXs was more due to profit-seeking effects or the desire to earn rewards.

But for foreigners, the situation is quite different.

Vida, a prodigy trader from the 2000s and founder of Equation News, shared some insights on Telegram to explain why foreigners are so bullish on Hyperliquid. According to screenshots provided by X user JinMu, Vida attributed the reasons to strict KYC and the poor user experience of domestic exchanges in the US.

Many investment institutions within the Web3 industry have also expressed to me that high-net-worth investors and family offices in China do not have a high level of trust in crypto. Even the founder of Huobi, Li Lin, holds Bitcoin positions indirectly through IBIT issued by BlackRock in his family office in Hong Kong. In contrast, large funds or high-net-worth individuals abroad have a higher acceptance of crypto, and many traditional financial institutions are experimenting with Web3 products.

It is no wonder that Bloomberg began to frequently focus on Hyperliquid in March, as the whale users on the platform may include some traditional financial institutions that find liquidity lacking on weekends.

As for CEXs, no matter how high your trading volume is, you still do not know who is trading. From the perspective of "reference value," it indeed cannot compare to DEXs. In addition, the self-custody of DEXs, the transparency of transactions, and the unrestricted leverage also provide fertile ground for financial traders to unleash their potential.

"A platform that does not adhere to regulatory constraints will eventually be taken down by regulators."

This is a sentiment many have recently observed. Launching new assets without review, not questioning the source of funds, and treating leverage equally are indeed actions that dance on the regulatory red line, but this may be a platform that exists in a gray area that is tacitly allowed. Just like TikTok, the government can shut it down under the guise of "national security," but the American public will not agree, nor will stakeholders and officials hoping to profit from this matter.

In the future, when certain international events affect the prices of metals, grains, and raw materials, Hyperliquid can replicate the miracles of gold and crude oil. I believe that in the short term, regulation will not take action against Hyperliquid. The "Golden Triangle" area, which was once unregulated, was ultimately eradicated not solely due to the dangers of drugs but possibly because someone wanted to profit from it. The fact that S&P Dow Jones Indices authorized Hyperliquid, rather than any CEX, to launch S&P 500 index perpetual contracts is the best evidence.

The same reasoning applies to perp DEXs like Hyperliquid; as long as certain core interests are not touched, it has its value.

Pricing for "Uncertainty"

As HIP-3 is thriving, HIP-4 is quietly building momentum.

Launched on the testnet on February 2, 2026, HIP-4 introduces the "Outcome Trading" feature, a fully collateralized contract type that settles within a fixed price range, specifically designed for prediction markets and options-like products.

Unlike Hyperliquid's core perpetual contracts, HIP-4's outcome contracts have an expiration date, require no leverage, have no liquidation risk, and settle within predefined price ranges. For example, if you believe Bitcoin will break $80,000 by the end of March, you can purchase the corresponding outcome contract. If Bitcoin indeed exceeds $80,000 at expiration, the contract settles for profit at the upper limit; if not, it settles at the lower limit, with losses limited to the initial investment.

The market generally interprets HIP-4 as "Hyperliquid's entry into prediction markets," but this may underestimate its strategic significance. The true value of HIP-4 lies in its expansion of Hyperliquid from a purely derivatives exchange to a more comprehensive "uncertainty pricing platform."

Isn't Polymarket also pricing for uncertainty? Not really; prediction markets display more probabilities. When you believe an event has an 80% chance of occurring, but the amount you plan to invest would push that probability directly to 99%, you will naturally choose to reduce your funding.

Outcome contracts can reveal risk preferences through the amount of capital. Taking the example of whether Bitcoin will break $80,000 by the end of March, many people on Polymarket might choose "no," but on Hyperliquid, you might see many buying call options. This indicates that while many people are indeed bearish, they are not that pessimistic, or these investors believe they need to hedge against a possible rise.

If Bitcoin really rises to $80,000 by the end of March, you will watch the probability on Polymarket rise from 20% to 80% when it hits $79,000, and it will be too late.

Additionally, HIP-4 complements Hyperliquid's existing perpetual contracts. Traders can seamlessly switch between linear derivatives (perpetual contracts) and non-linear derivatives (outcome contracts) under the same account and margin system, constructing more refined and efficient portfolios. This "composability" is Hyperliquid's advantage over dedicated prediction market platforms.

Money Never Sleeps

We are witnessing the era of "money never sleeps" becoming a reality.

On one hand, prediction markets, which tread the edge of gambling, allow events with certain outcomes to be wagered on; on the other hand, on-chain trading platforms provide ample liquidity for pricing unexpected events even during holidays when traditional markets are closed.

The arbitrage opportunities arising from information asymmetry have become the lifeblood of a "platform." The boundaries of the platform will continue to expand; currently, they are temporarily limited to Earth, but in ten or twenty years, you might be able to trade lunar minerals on a spaceship heading to Mars.

We welcome the advancement of finance, a product invented by humans, further propelled by blockchain, but we must also remind ourselves:

My life has limits, while knowledge is limitless. To use the limited to pursue the limitless is perilous!