Can Entropy Become the Next Trade? The Pre-IPO Battle Has Begun

Original author: diogenes (X)

Original translation: Deep Tide TechFlow

TechFlow Introduction: Entropy's HIP-3 prediction market made a splash upon launch. As an investor, the author was initially excited, considering it one of the rare impressive launches by new founders recently; its Anthropic market open interest surged from hundreds of thousands of dollars to nearly $3 million. But skepticism followed—"They're just trying to create another Ventuals." On the surface, this logic seems flawless: others tried and failed, so what makes you special? Yet the author counters: before Hyperliquid, no one had truly challenged centralized exchanges, and it was the design differences of HLP and Hypercore that changed the outcome. Micro-innovations in details often determine success or failure.

Entropy's recent launch has been nothing short of impressive. As an investor, I'm very excited—I think it's one of the most successful launches I've seen recently, especially for a new venture in the crypto space. Entropy's Anthropic market open interest has soared from an initial few hundred thousand dollars to nearly $3 million at the time of writing, far exceeding any other market I've seen. However, not everyone is positive about this launch.

Besides Jake Paul's controversial tweet (which unsurprisingly drew some criticism), an interesting point I've heard on Twitter is: "Oh, these people are just trying to do..." @ventuals "Here we go again." Naturally, people think: "Oh, this has been tried before and didn't work, so what makes them think they're special?"

This logic seems reasonable at first glance. Einstein said, "Insanity is doing the same thing over and over and expecting different results." However, ignoring nuances reflects great ignorance. There are countless examples where this thinking is completely wrong. Before Hyperliquid, no DEX had truly challenged centralized exchanges.

DEXs improved over time but still had limitations. Many thought Hyperliquid would be the same. Hyperliquid changed the game because its design allowed sustainable liquidity bootstrapping through HLP, and Hypercore's infrastructure was scalable enough to support the volume needed for a major exchange. There are many other differences between Hyperliquid and its predecessors, but those two are its core innovations.

The key point: details matter, and seemingly small changes can have a significant impact on outcomes.

Now, let's look at Ventuals' problems, because there are many. Ventuals focused on pre-IPO, but the time span far exceeded what was needed for an IPO. Ventuals' Anthropic market launched in November 2025, when Anthropic hadn't even filed for an IPO.

This led to a huge discrepancy between Ventuals' market prices and the actual prices in Anthropic's secondary market. Given that the underlying asset supply for Anthropic is restricted (i.e., hard to buy), and Ventuals' underlying assets came partly from the secondary market and partly from other channels, this meant Ventuals' funding rates were extremely volatile—notably, at one point reaching 8700%!

These funding rates were not arbitraged because holders of the underlying market didn't trust Ventuals' design, believing its markets couldn't reflect the true value of these assets. Thus, a vicious cycle formed: a market emerged with an asset similar to Anthropic but not exactly Anthropic, highly volatile, and extremely expensive to hold. This situation, combined with the inability to attract liquidity providers, led to most of Ventuals' markets being acquired by Trade.

Now let's look at Entropy. Entropy launched its Anthropic market the month after filing its S-1; according to Fortune, its IPO is currently expected in October. Depending on when in October, that's between one and a half to two months from now. This window falls into a somewhat forgotten piece of Hyperliquid history. I like to call it the "pre-IPO wars."

During the "market wars" before token listings, exchanges like Hyperliquid competed fiercely to start trading new tokens before their broad issuance, aiming to gain an early advantage. By being first to market and having the best liquidity, an exchange could become the primary trading venue after the token officially listed. This meant most trading volume would flow through these exchanges, generating huge profits. Therefore, exchanges were even willing to operate at a loss to secure market control, much like Costco sells hot dogs at a loss to attract more customers who then buy other profitable items. Here, the "hot dog" is pre-listing liquidity, and the "other items" are post-listing trading fees.

With few exceptions, Hyperliquid won the pre-IPO wars decisively. While it obviously didn't become the world's largest exchange, that wasn't the point. It went from an obscure small exchange to a top-four global exchange, largely thanks to the pre-IPO wars. It captured significant market share by launching more liquid markets earlier than competitors. This relied heavily on HLP itself, and some entities wanting to harm Hyperliquid or profit from it (often both) would use various tactics to manipulate prices or directly affect HLP (list of events). However, despite these challenges, Hyperliquid persevered and has become one of the most valuable projects of the past five years, possibly even the greatest project since Bitcoin.

Hyperliquid's next natural step is to allow trading of traditional asset markets. As the world's premier economic power and issuer of the world's primary reserve currency, the United States holds the vast majority of these assets, and its regulators have historically been hands-on, ready to send warning letters to any project that might even slightly touch US companies or prices. Therefore, after consolidating its control over crypto assets, Hyperliquid would reasonably want third-party decentralized teams to manage these markets while leveraging the infrastructure and user base Hyperliquid has built. However, Hyperliquid has not provided support through HLP; any new team must create liquidity on its own.

Trade was the first to deploy HIP3 at scale and the first to truly utilize liquidity. @sershokunin Trade successfully launched multiple stock markets and rapidly expanded liquidity through partnerships and trader distribution channels. Trade launched in mid-October 2025. By November 6, Trade's XYZ100 (a Nasdaq 100 index product) had surpassed $1 billion in trading volume, and today its open interest and daily trading volume are in the billions of dollars.

While Trade flourished, Ventuals' products underperformed. Ventuals often entered markets before Trade but failed to capture enough market share, and when Trade launched competing products, Ventuals' market share was completely eroded.

Trade's core innovation and competitive advantage lie in extensive collaboration with market makers and traders to ensure volume, while also changing some mechanics of its markets to bring them closer to "economic gravity," or to make its markets reflect the true price of assets.

Entropy holds two core beliefs: first, providing more direct liquidity (e.g., an HLP-like model) benefits the long-term health and robustness of its markets; second, building partnerships with distribution partners will become increasingly important. Liquidity and stability are crucial. This is also reflected in its design, which differs significantly from Ventuals, especially regarding funding rates: Entropy's funding rates tend toward 10%, while Ventuals' grow exponentially.

In theory, these differences in approach and design should allow Entropy to more effectively help markets price stocks more accurately. This would also reassure both long and short traders that their positions won't be liquidated due to funding in these less liquid pre-IPO markets (where traders suffer losses if forced to close due to slippage and may become prey for other traders).

Whether Entropy can win the pre-IPO competition depends first on whether they can build public confidence in their model and markets, which likely requires consistent execution and close collaboration with traders to ensure traders feel comfortable using their markets. Second, whether they can, on their own or through partners, market-make/price their markets, attempting to introduce an HLP-like (high liquidity pricing) model for pre-IPO trading, which has not yet been applied at scale in HIP3.

At that point, perhaps a second truly successful HIP3 market will emerge, and we may see it genuinely compete with Trade in emerging prediction markets and in advancing HIP3.