Hyperliquid’s HYPE token may soon see a major supply overhaul after a leading crypto asset manager proposed slashing future emissions and community rewards, effectively cutting the token’s supply by 45%.
DBA’s Supply Cut Proposal
DBA Asset Management investment manager Jon Charbonneau, alongside crypto researcher Hasu, unveiled the plan on X, outlining three key changes to Hyperliquid’s tokenomics:
- Revoke authorization for all unminted HYPE tokens reserved for future emissions and community rewards (FECR).
- Burn the 21 million HYPE currently held in Hyperliquid’s Assistance Fund (AF).
- Remove the 1 billion supply cap, giving governance flexibility for future issuances if needed.
If approved through governance, the move would permanently eliminate 421 million HYPE from FECR allocations and the 21 million in the AF, cutting supply by nearly half.
Charbonneau argued that current valuation models unfairly punish HYPE due to excess unissued tokens being factored into its fully diluted valuation (FDV).
“The market penalizes this excess supply in valuing the protocol, and pre-allocating these tokens may unduly bias future capital allocation decisions,” Charbonneau wrote, adding that the proposal would make HYPE more attractive for investors and stakers while keeping issuance optional.
Industry Support and Pushback
Some major institutional voices are already backing the plan. Dragonfly Managing Partner Haseeb Qureshi said the nearly 50% community allocation acts as a vague “slush fund,” noting:
“Spending tokens on growth incentives is fine if transparent, but allocating half the supply to ‘do whatever with’ is silly and should end.”
However, not everyone is convinced. Mister Todd, a well-known crypto commentator, blasted the proposal as “foolish and a disaster,” warning that emissions are a critical growth lever for Hyperliquid.
Others raised concerns about not having a large reserve for emergencies such as regulatory fines or sanctions. Charbonneau countered that the plan doesn’t reduce what’s available in such scenarios — it only changes how it’s accounted for.
Momentum in the Hyperliquid Ecosystem
The debate comes at a time when Hyperliquid is gaining significant traction. The decentralized derivatives exchange handled $330 billion in trading volume in July with just 11 team members.
It recently introduced USDH, a dollar-pegged stablecoin, which is expected to become a key revenue driver. A governance vote to decide the issuer saw interest from Paxos, Frax, Sky, Agora, and Native Markets, with Native ultimately winning.
Meanwhile, HYPE recently surged to an all-time high of $59.30, even as the broader crypto market traded flat or down.
If passed, DBA’s proposal would reshape Hyperliquid’s tokenomics and potentially set a precedent for other protocols reconsidering large community allocations. For investors, a reduced supply could bolster long-term scarcity value, though critics warn it may limit growth incentives.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.