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The crypto world is once again buzzing with debate as a prominent asset management firm has proposed a dramatic cut to the supply of HYPE, the token powering decentralized derivatives exchange Hyperliquid. The plan, which suggests slashing HYPE’s supply by 45%, is stirring both strong support and sharp criticism across the industry.
The Proposal in Detail
The proposal was put forward by DBA Asset Management investment manager Jon Charbonneau, alongside pseudonymous crypto researcher Hasu. It calls for three major changes to HYPE’s tokenomics:
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Revoking authorization for all unminted HYPE tokens allocated for future emissions and community rewards (FECR).
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Burning all HYPE tokens stored in Hyperliquid’s Assistance Fund (AF).
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Removing the current supply cap of 1 billion HYPE tokens.
If passed, the proposal would see approximately 421 million tokens from the FECR pool and 21 million tokens from the AF eliminated, cutting nearly half of HYPE’s potential future supply.
Why Slash the Supply?
According to Charbonneau, the market currently misvalues HYPE because of its large pool of unissued tokens. These tokens are factored into the fully diluted valuation (FDV) of the protocol, creating the perception of oversupply and limiting investor confidence.
“This is problematic because the market penalizes this excess supply in valuing the protocol,” Charbonneau explained. “Pre-allocating these tokens may unduly bias future capital allocation decisions.”
By slashing the supply, DBA argues that HYPE would become easier to value, more attractive to investors, and more rewarding for long-term stakers, all while leaving Hyperliquid room to issue new tokens in the future if needed.
Hyperliquid’s Rapid Growth
The proposal comes during a period of heightened attention on Hyperliquid. The platform, which operates with a lean team of just 11 members, handled an impressive $330 billion in trading volume in July alone.
Adding to the momentum, Hyperliquid recently introduced its dollar-backed stablecoin, USDH. The governance vote to decide the issuer attracted bids from major players including Paxos, Frax, and Agora, with Native Markets emerging as the winner. Once rolled out, Charbonneau believes USDH could significantly boost Hyperliquid’s revenue stream.
Institutional Voices Join the Debate
Other institutional investors have voiced support for DBA’s proposal. Dragonfly Managing Partner Haseeb Qureshi echoed the sentiment, calling Hyperliquid’s nearly 50% allocation of tokens for community use an “amorphous slush fund.”
He argued that while distributing tokens for growth incentives makes sense, setting aside almost half of the supply with no clear plan is inefficient. “Allocating nearly 50% of the total supply ‘to do whatever with’ is silly, and we should end it,” Qureshi said.
Critics Push Back
Not everyone is on board with the drastic cut. Crypto commentator Mister Todd blasted the idea as “absolutely foolish and a disaster.” He argued that future token emissions are one of the most powerful growth tools Hyperliquid has at its disposal, and removing them would weaken the platform’s ability to scale.
Other critics suggested Hyperliquid should keep a reserve of tokens in case it faces fines or regulatory sanctions in the future. Charbonneau responded to this concern by clarifying that the proposal does not reduce the number of tokens available in such scenarios. Instead, it changes how those tokens are accounted for.
Market Reaction and HYPE’s Price Movement
The debate comes at a volatile time for HYPE’s price. Last week, the token surged to a new all-time high of $59.30, bucking the broader crypto market’s sideways trend. However, the rally was short-lived, with HYPE sliding more than 22% to around $46.08 in the days that followed.
The sell-off was partly driven by Maelstrom Fund, the investment firm led by Arthur Hayes, which confirmed it had exited its HYPE holdings. Hayes cited the looming pressure of nearly $12 billion worth of token unlocks scheduled over the next two years as a key reason for the move.
What Comes Next for HYPE?
The proposal is now in the hands of Hyperliquid’s governance system, where stakeholders will decide whether to move forward. DBA’s significant holdings mean it will play a major role in the voting outcome, but the final decision will rest with the broader community.
If approved, the plan could reshape HYPE’s economics and potentially position Hyperliquid as a more investor-friendly project. However, critics warn that the move risks stripping the platform of one of its most effective growth levers.
