Why a Futures Giant Wants Hyperliquid's Retail Crowd: GSR's Baehr on ICE and Trade[XYZ]

1. The ICE Hyperliquid deal is aimed at retail traders

Andy Baehr, managing director of asset management at GSR, argues that the ICE Hyperliquid deal announced on October 29 is a bet on retail traders who want outcomes that resolve quickly. Intercontinental Exchange (ICE) agreed with Trade[XYZ] to bring that platform's markets, which run on the decentralized exchange Hyperliquid, onshore in the United States, and Baehr says perpetual futures fit the same appetite as prediction markets.

His reasoning begins with an analogy from sport. American football and baseball are built from discrete events, each of which builds suspense and pays off before the game resets. Soccer, basketball, hockey and racing flow continuously, and the drama arrives whenever it happens to arrive. Baehr suggests that retail traders are drifting toward the first kind of experience, in which a position is opened and its result is known soon afterward.

The argument is a column, so it reflects the author's interpretation and not a company announcement. Still, it draws on concrete figures from several markets, and it offers a coherent explanation of why a large traditional exchange operator would partner with a venue that grew up in crypto.

2. Why do retail traders want fast-resolving bets?

Retail traders increasingly favor products that deliver a clear result in a short time. Academics describe the pull of frequent, uncertain rewards as variable-ratio reinforcement, a term from behavioral psychology for payoffs that arrive unpredictably. Baehr jokingly calls the same effect dopamine, a shorthand for the thrill of waiting for an outcome that might go either way.

Prediction markets are the clearest example. Kalshi recorded its biggest month on record in October, with roughly $98 billion in contract volume. Contracts on these platforms settle when an event occurs, so participants get an answer quickly and can move on to the next question.

Same-day expiring options, often called zero-days-to-expiration or 0DTE options, tell a similar story. Cash-settled options on the S&P 500 listed at Cboe are now dominated by contracts that expire the same day, which made up two-thirds of volume in July. Cboe estimates that about half of that 0DTE volume comes from retail participants.

Seen together, these products share a feature: the trader does not have to wait weeks or months to learn whether the idea worked. Baehr's claim is that this feature, more than the underlying asset, explains much of their popularity.

3. How do perpetual futures fit the pattern?

Perpetual contracts, known as perps, belong in the same category in Baehr's view, and he regards them as one of crypto's major contributions to finance. Crypto exchanges popularized them over roughly the past decade. Unlike a traditional futures contract, a perp has no fixed expiration date, which lets a trader hold a leveraged position for as long as the collateral supports it.

The mechanics are simple. A trader posts collateral and takes a position. Either the position makes money, or an adverse move large enough to exhaust the collateral triggers liquidation, which closes the position automatically. The experience is therefore a quick resolution one way or the other.

Liquidation carries little stigma in this setting, Baehr notes, and it usually brings no further penalty, because insurance funds absorb most shortfalls. The exchange, in turn, invites the trader to return and try again. That loop, a fast result followed by an easy restart, is what he sees as the link to prediction markets and same-day options.

Leverage is central to how perps work, since a small amount of collateral can control a much larger position. That is also why liquidations occur so often: a modest move against the trader can be enough to wipe out the posted funds. The speed of the outcome is built into the design.

The point is descriptive and not an endorsement of leverage. Baehr is identifying why a product designed for crypto traders may appeal to a wider group of retail customers who care about speed and simplicity more than about any particular asset.

4. What did ICE and Trade[XYZ] agree to?

On October 29, ICE and Trade[XYZ] agreed to bring Trade[XYZ]'s markets onshore in the United States. Trade[XYZ] is a leading deployer of perps on real-world assets on Hyperliquid, one of the largest decentralized perpetual exchanges. Under the arrangement, ICE will be the exclusive operator of Trade[XYZ]'s regulated markets and will take a strategic stake in the business.

The announcement drew attention well beyond the crypto sector. Investor Stan Druckenmiller made his first-ever post on X to say he was excited to invest in Trade[XYZ]. Hyperliquid's HYPE token rose about 20% on the day, and the deal received wide and sustained coverage in the days that followed.

Baehr calls the transaction clearly retail-focused and notes that the press release says as much. That observation matters because ICE's established customer base looks very different. Its core clients are hedgers of commodities such as oil, coffee, cocoa and cotton, who use futures to lock in a price for a specific future date.

The distinction explains why the retail framing stands out. Institutional hedging and retail speculation are different activities with different needs, and a venue that serves one does not automatically serve the other.

Those hedgers have no interest in perpetual contracts. A producer or buyer of a physical commodity wants a dated contract, and traditional futures suit that purpose better. The Trade[XYZ] venture is therefore aimed at a different audience from the one that built ICE's business, which is the heart of Baehr's argument.

5. How might the new structure work?

ICE is entering the perp race through several channels, according to Baehr. It has a joint venture with OKX aimed at retail distribution, a plan for tokenized equities, and access to the New York Stock Exchange and its brand. Together those assets give the company routes to customers that a pure crypto venue would find hard to replicate.

Baehr sees a possibly competitive structure taking shape. Futures commission merchants, the brokers that handle customer accounts, would sit at the front end. Hyperliquid infrastructure would operate underneath. A separate clearing structure run by ICE, walled off from the company's institutional clearinghouses, would stand behind the trades.

If that design holds, existing United States users of Hyperliquid could move into a regulated environment that is at least similar to the one they know. They would not have to learn a new product, only a new access point.

The separate clearing setup carries another implication, in his reading. It may signal that liquidations will be routine rather than exceptional, so that the user experience people value in perps is preserved. A walled-off structure means that the losses of retail traders would not spill into the clearinghouses that serve institutional clients.

6. Does the model need a crypto asset?

No, and that is one of Baehr's most important observations. Trade[XYZ] focuses on equities, commodities and currencies, not on digital tokens. A customer can trade a perp on a stock or on oil without ever holding a cryptocurrency.

Baehr asks why anyone would add a crypto barrier on top of the learning curve that already comes with perps. Buying a token, moving it to a venue and managing a wallet are all extra steps. His conclusion is that the market of people who want perp-style trading in equities and commodities is likely larger than the market of people who want it in crypto.

This is the sense in which the deal does not need a crypto asset to work. Crypto contributed the product design, the perpetual contract with its collateral and liquidation rules, but the assets that traders might use it on can come from the traditional markets.

7. What is the regulatory backdrop?

Regulation is moving in the same direction. On November 3, Commodity Futures Trading Commission Chairman Michael Selig announced that perpetual futures on individual stocks can now trade on exchanges registered with the CFTC that are also notice-registered with the Securities and Exchange Commission for security futures. ICE Futures U.S. filed for that registration on September 30.

Baehr cites this as another example of harmonization between the SEC and the CFTC, which he also credits to crypto. The two agencies have long divided oversight of securities and derivatives, and the arrival of products that blur the line has pushed them to coordinate.

For ICE, the announcement removes one obstacle to offering perps tied to individual stocks on a registered venue. More regulatory work remains for the combined ICE and Trade[XYZ] business before the planned markets can operate in the form Baehr describes.

8. What comes next for ICE and perp competitors?

Competition is already under way. Other perp venues, including Kalshi and Coinbase, are live and growing. Baehr asks whether ICE, one of the two big United States futures exchanges and a business with an institutional focus, can keep pace with firms that were built around retail customers from the start.

He does not answer the question with certainty, but he points out that the market's excitement about the deal suggests optimism. The rise in the HYPE token and the response from prominent investors show that participants are willing to give the partnership the benefit of the doubt.

The next steps are regulatory approvals for the ICE and Trade[XYZ] markets and the launch of the retail distribution channels that the company has outlined. The outcome will show whether an exchange with deep institutional roots can win the customers who have embraced prediction markets, same-day options and perpetual futures.