Decentralized exchange platform Hyperliquid is weighing a sweeping proposal that could reshape its tokenomics.

The plan, introduced on Sept. 22 by DBA investment manager Jon Charbonneau and pseudonymous researcher Hasu, calls for a 45% reduction in the total supply of HYPE.

Charbonneau and Hasu argue that Hyperliquid’s current setup distorts valuation metrics, leaving the protocol at a disadvantage compared to peers.

They say that by cleaning up the balance sheet, the market can better assess Hyperliquid’s fundamentals and investors can make more informed decisions.

They stated:

“Given HYPE’s current supply dynamics, it’s one of the most unfairly penalized tokens on the market today.”

This proposal comes at an interesting time when fears of an impending $12 billion HYPE token unlock have sparked concerns within the crypto community.

Considering this, the proposal outlined several key changes to Hyperliquid’s HYPE token supply to reduce those concerns and stabilize its market standing.

Burning excess HYPE’s supply

At the heart of the proposal is a recommendation to revoke and burn more than 450 million tokens originally earmarked for the Future Emissions and Community Rewards (FECR) fund and the Assistance Fund (AF).

According to Charbonneau and Hasu, this excess authorized supply, including the 421 million HYPE for the reward program and 31 million for the assistance fund, has led the market to penalize the token unfairly.

They argue that these large reserves create downward pressure by skewing expectations of future distribution.

According to them:

“Hyperliquid currently has a large amount of authorized non-outstanding supply…This is problematic because the market penalizes this excess supply in valuing the protocol.”

By eliminating these allocations, the authors contend that Hyperliquid c

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Author: Oluwapelumi Adejumo