A bold proposal to reduce the total supply of HYPE, the governance and utility token powering decentralized derivatives exchange Hyperliquid, has been put forward by crypto asset manager DBA Asset Management.
The firm suggested slashing HYPE’s supply by 45% in an effort to make the project’s tokenomics leaner and more attractive to institutional and retail investors.
In an X post on Monday, Jon Charbonneau, investment manager at DBA, detailed three major reforms to Hyperliquid’s economic model. These include:
- Canceling authorization for all unminted HYPE reserved for future emissions and community rewards (FECR).
- Burning tokens currently held in Hyperliquid’s Assistance Fund.
- Eliminating the existing 1 billion maximum supply cap.
The proposal, co-authored with pseudonymous researcher Hasu, would need to pass Hyperliquid’s governance process. DBA itself is positioned to play a major role in the vote, as it actively stakes and holds a significant amount of HYPE.
Charbonneau argued that current market valuations of HYPE are distorted by the fully diluted valuation (FDV) metric, which factors in unissued tokens. He said that cutting supply would “correct mispricing” and make HYPE more appealing to investors and stakers, while still leaving the protocol room to issue new tokens for strategic initiatives.
Under the plan, around 421 million HYPE from future emissions and 21 million from the assistance fund would be permanently removed from circulation.
Context: Hyperliquid’s Growth and New Stablecoin
The timing of the proposal comes as Hyperliquid experiences growing momentum. Recently, the platform introduced its own U.S. dollar stablecoin, USDH, which attracted bids from major issuers like Paxos, Frax, Sky, Agora, and Native Markets—the latter ultimately securing the role.
Despite operating with a team of just 11 people, Hyperliquid processed $330 billion in trading volume in July, placing it among the most efficient platforms in the sector. Charbonneau added that USDH is expected to contribute significantly to Hyperliquid’s revenue stream once launched.
Institutional Support and Pushback
The proposal has drawn attention from other major crypto players. Dragonfly’s managing partner Haseeb Qureshi backed the idea, describing Hyperliquid’s nearly 50% allocation for community incentives as “an amorphous slush fund.” He argued that while token spending on growth is acceptable, allocating half the supply without a clear framework is “silly” and should be ended.
Not everyone is on board, however. Crypto commentator Mister Todd called the plan “foolish” and “a disaster,” claiming that emissions remain Hyperliquid’s strongest tool to drive ecosystem growth. Others warned that keeping a token reserve could be necessary in case of legal or regulatory penalties.
Charbonneau dismissed those concerns, clarifying that the proposal doesn’t actually reduce HYPE’s availability for emergencies, but rather changes how it is accounted for.
Market Impact: Rally Followed by a Cool-Off
The debate coincides with heightened volatility in HYPE’s price. The token recently surged to an all-time high of $59.30, even as the broader crypto market trended sideways. However, HYPE has since fallen more than 22% to $46.08, with selling pressure intensifying after Arthur Hayes’ Maelstrom Fund reportedly liquidated its entire position.
Hayes cited the looming unlock of nearly $12 billion worth of tokens over the next two years as the reason behind the firm’s exit.
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