Hyperliquid is playing a strong hand to stop the decline of its token. On December 17, the Hyper Foundation submitted a governance proposal to burn all HYPE held in the Assistance Fund, approximately 37 million tokens. A decision with significant consequences: it would instantly reduce over 13% of the circulating supply, in hopes of restoring confidence after a price drop of over 50% in a few months.
Hyperliquid Wants to Burn 13% of the HYPE Supply
The announcement immediately sparked positive reactions in the community, with HYPE rising about 2% in the hours following the publication, around $27. But beyond the short-term movement, it is the structural impact of the proposal that captures attention.
The Assistance Fund at the Core of the Burn Mechanism
The Assistance Fund holds a central role in Hyperliquid‘s architecture. This fund automatically collects a portion of the network’s trading fees, which is converted to HYPE at the layer 1 execution level, generating constant buying pressure on the token. The accumulated tokens are sent to a specific system address, 0xfefefe, comparable to a zero address, which has no private key.
In practice, these HYPE tokens are locked and inaccessible, except in the event of a protocol hard fork. The Hyper Foundation’s proposal aims to formally lock these tokens. If adopted, the 37 million HYPE currently stored would be officially removed from the supply, and all tokens sent to this address in the future would face the same fate.
A Crucial Vote for Validators and Hyperliquid Governance
The implementation of the burn now depends on the validator vote. A favorable vote would recognize these tokens as permanently out of circulation and commit to never approve a protocol update that would allow their recovery.
The timeline is tight. Validators must express their position on the governance forum before December 21 at 04:00 UTC. HYPE holders can then delegate their stake to validators aligned with their vision until December 24 at 04:00 UTC, where the consensus weighted by staking will be finalized. Several validators, including Kinetiq x Hyperion, have already voiced support for the burn.
Caution in the Market, Derivatives Boiling
While spot trading remains cautious, derivative markets show a marked increase in interest. Open interest on HYPE futures has increased by 3% in 24 hours to reach $1.52 billion, with over 5% increases observed on platforms like Binance. A signal that traders anticipate a possible shift in dynamics.
This proposal also comes at a time of increased institutional attention. Bitwise recently amended its filing to launch a spot ETF for Hyperliquid in the United States, with a ticker of BHYP and announced management fees of 0.67%.
For Hyperliquid, the message is clear: the burn of 13% of the supply is not just a symbolic gesture but an attempt to rebuild the economic credibility of the token. It remains to be seen if governance will follow suit, and if the supply reduction will be enough to sustainably reverse the trend on HYPE.
