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A new proposal from investment manager Jon Charbonneau and crypto researcher Hasu is sparking debate over the future of Hyperliquid’s native token, HYPE. The suggested Hype supply cut aims to reshape the token’s structure by removing market uncertainty around unused allocations.
Charbonneau shared the proposal on X, outlining three major measures: revoking authorization for 421 million unminted tokens previously set aside for emissions and community rewards, burning 21 million HYPE from the protocol’s Assistance Fund, and eliminating the 1 billion token cap.
“Pre-allocating these tokens may unduly bias future capital allocation decisions,” he wrote, arguing that unused reserves distort HYPE’s fully diluted valuation and penalize the protocol’s perceived value.
The Hype supply cut is positioned as a way to strengthen Hyperliquid’s market perception, particularly as the exchange experiences rising adoption and investor attention.
The proposal quickly drew mixed responses from industry voices. Dragonfly managing partner Haseeb Qureshi voiced support, describing the current structure as problematic. He said the nearly 50% community allocation functions like an “amorphous slush fund” and stressed that growth incentives should be distributed transparently.
On the other hand, critics argued that the Hype supply cut could backfire. Crypto commentator Mister Todd dismissed the plan as “foolish,” suggesting that emissions remain Hyperliquid’s strongest growth mechanism. Others raised concerns that reducing reserves could weaken the platform’s ability to respond to legal or regulatory challenges.
Charbonneau countered these claims, clarifying that the proposal doesn’t eliminate emergency reserves but instead redefines how tokens are accounted for.
The debate comes during heightened volatility for HYPE. The token surged to an all-time high of $59.30 before retreating 22% to $46.08 as market sentiment cooled.
Meanwhile, the Maelstrom Fund, led by BitMEX co-founder Arthur Hayes, announced the sale of its entire HYPE position. The fund pointed to $12 billion worth of token unlocks expected over the next two years as a key reason for exiting.
These developments suggest that the Hype supply cut proposal could play a significant role in restoring investor confidence if adopted. By removing uncertainty about token supply, Hyperliquid may strengthen its standing among long-term holders concerned about dilution.
The Hype supply cut proposal arrives as Hyperliquid expands governance activity across its ecosystem. Just last week, the exchange concluded a high-profile vote on who would issue its upcoming stablecoin, USDH.
Validators selected Native Markets, a younger player backed by Stripe’s Bridge subsidiary, over established competitors such as Paxos and Ethena. According to Hyperliquid, USDH will be a “Hyperliquid-first, compliant, and natively minted” dollar-backed token aimed at reducing reliance on USDC.
The governance vote became a flashpoint in the community, with rival proposals offering aggressive revenue-sharing terms to secure validator support. The decision in favor of Native Markets underscores the increasing importance of governance in shaping Hyperliquid’s future direction.
Hyperliquid’s rapid growth has heightened scrutiny of its governance and tokenomics. The decentralized exchange processed $330 billion in trading volume in July with just 11 team members, according to DefiLlama.
By addressing perceived inefficiencies in its token supply structure, proponents argue the Hype supply cut could help align Hyperliquid’s valuation with its operational success. However, detractors maintain that limiting flexibility could undermine future growth strategies.
As the proposal moves through Hyperliquid’s governance process, its outcome may shape investor confidence in the protocol’s long-term trajectory. The debate illustrates the broader challenge facing decentralized exchanges: balancing community-driven governance with the need for strategic flexibility in competitive crypto markets.
The decision on the Hype supply cut will also serve as a litmus test for how much influence large token holders wield within Hyperliquid’s governance. With venture funds, retail investors, and protocol insiders all holding significant stakes, the vote could reveal whether community sentiment or concentrated capital ultimately guides the platform’s direction.
