The Hyperliquid token (HYPE) has taken a nosedive over the past few weeks, shedding more than 60% of its value since December. Despite a surge in trading volume and a growing market share, the token has dropped from $35 to around $14, erasing approximately $4.6 billion in market capitalization.
Crypto Sell-Off Hits Hyperliquid Hard
HYPE’s collapse isn’t happening in a vacuum. The broader crypto market has been struggling, with Bitcoin down 23% from its yearly high. That decline pushed Bitcoin into bear market territory, a term used when an asset loses at least 20% of its value from a recent peak. And when Bitcoin sneezes, the rest of the crypto world catches a cold.
Adding to the pressure is Hyperliquid’s ongoing token dilution. Right now, 333 million HYPE tokens are in circulation, but that number is steadily increasing. Every month, around 433,000 new tokens are unlocked, and this will continue until 2028.
More tokens in circulation usually mean lower prices, especially when demand isn’t keeping up. Investors are well aware of this and have been offloading their holdings.
Concerns Over Hyperliquid’s Stability
One big question looming over Hyperliquid is whether it can handle major market stress. As a perpetual decentralized exchange (DEX), the platform allows leveraged trading—where investors borrow money to amplify their bets.
According to CoinGlass data, a single trader placed a massive $151 million short position on Ethereum, raking in over $70 million in profits. That’s just one example, but it raises concerns about what happens if a wave of liquidations hits.
The worry is simple: Can Hyperliquid absorb a sudden cascade of forced sell-offs without spiraling into deeper trouble?
Then there’s the legal angle. Crypto investigator ZachXBT recently alleged that one of Hyperliquid’s top traders may have used stolen funds. While no official action has been taken, any regulatory scrutiny could add another layer of uncertainty for investors.
Hyperliquid’s Strengths Still Intact
Despite the price drop, Hyperliquid isn’t exactly falling apart. In fact, its trading volume and market share are surging.
- Over the past seven days, Hyperliquid processed more than $29 billion in perpetual futures trades.
- Its cumulative trading volume has now surpassed $1.13 trillion.
- It holds a dominant 59% share of the perpetual futures DEX market.
For context, Jupiter, the second-largest player in the sector, only handled $4.05 billion in the same period. Other well-known platforms like ApeX Protocol, Vertex Edge, dYdX, and GMX have seen their market share dwindle.
Can Buybacks and Burns Support the Price?
Developers aren’t ignoring the impact of token dilution. To counteract the flood of new tokens, Hyperliquid has implemented a buyback-and-burn strategy.
Here’s how it works: The platform generates revenue from trading fees—often exceeding $4 million per day. A portion of those funds goes toward repurchasing and permanently removing HYPE tokens from circulation.
In theory, this should help support the price by reducing supply. But whether it’s enough to offset the selling pressure remains to be seen.
A Rebound Could Be in the Cards
If history is any guide, HYPE’s fate will likely depend on the broader crypto market. If Bitcoin and other major tokens recover, investor sentiment could shift, and HYPE might ride the wave higher.
But for now, the token remains under pressure. With ongoing dilution, leverage risks, and potential regulatory concerns, investors should brace for more volatility in the weeks ahead.
