A cryptocurrency asset management company holding HYPE — the token for the decentralized derivatives exchange Hyperliquid — has suggested reducing the total supply of HYPE by 45% to enhance its tokenomics for investors.
In a post on X on Monday, DBA Asset Management’s investment manager Jon Charbonneau detailed three modifications to Hyperliquid’s economic framework: revoking the authorization for all unminted HYPE tokens designated for future emissions and community rewards (FECR), burning all HYPE in Hyperliquid’s Assistance Fund (AF), and eliminating HYPE’s 1 billion supply limit.
His proposal was co-written with an anonymous crypto researcher known as Hasu.
Although the plan requires approval through Hyperliquid’s governance process, DBA is anticipated to play a significant role, as it actively stakes HYPE and maintains a substantial stake in the token.
The DBA executive indicated that the proposed adjustments aim to address the market’s mispricing of HYPE, which he attributes to the fully diluted valuation metric that incorporates unissued tokens.
“This is concerning as the market penalizes this excessive supply when evaluating the protocol, and pre-allocating these tokens may unfairly influence future capital allocation choices,” he stated, adding that this change would render HYPE more attractive to investors and stakers while safeguarding the protocol’s ability to finance initiatives through new issuances.
The proposal — which would reduce 421 million HYPE from the future emissions and community rewards category and 21 million from the assistance fund — comes amid a resurgence of investor interest in the Hyperliquid ecosystem.
Within a week of launching its new US dollar stablecoin, USDH, Hyperliquid initiated a vote to determine the issuer of the stablecoin, garnering attention from Paxos, Frax, Sky, Agora, and Native Markets, with the latter emerging victorious last week.
Hyperliquid achieved $330 billion in trading volume in July with a team of 11 people, positioning itself as one of the industry’s most efficient platforms.
Charbonneau emphasized that USDH would significantly enhance Hyperliquid’s revenue upon rollout.
Other institutional crypto investors back DBA’s proposal
Dragonfly managing partner Haseeb Qureshi concurred with Charbonneau’s perspective, asserting that the nearly 50% community allocation serves as an “amorphous slush fund” for Hyperliquid governance members to determine its use at a later stage.
Qureshi pointed out that while it’s acceptable to spend tokens on growth incentives, it should be done transparently; allocating almost 50% of the total supply “to do whatever with is unwise and should be discontinued.”
Charbonneau’s proposal faced criticism
Crypto analyst Mister Todd characterized the proposal as “absolutely foolish and destructive,” arguing that future emissions are Hyperliquid’s most potent growth tool.
Related: Hyperliquid whale withdraws $122M HYPE tokens as Arthur Hayes exits
Others proposed that Hyperliquid should retain tokens set aside for potential fines or sanctions from the Department of Justice or similar authorities.
However, Charbonneau countered both arguments, clarifying that the proposal does not decrease the HYPE available in such situations; it merely alters the accounting of it.
HYPE retraced after reaching a new peak
This comes after HYPE spiked to a new all-time high of $59.30 on Thursday, whereas the wider crypto market continues to trend downwards and sideways.
HYPE has since dropped more than 22% to $46.08 as market sentiment cooled and investment firms like Arthur Hayes-led Maelstrom Fund divested their entire HYPE holdings.
Hayes remarked that the firm sold its HYPE holdings in anticipation of selling pressure from about $12 billion worth of token unlocks over the next 24 months.
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