Hyperliquid: Can $912 Million in Token Burns Help HYPE Reach $40?

Hyperliquid has been experiencing market challenges, with its token HYPE declining from a peak of $50 to a current price of around $23.94. In response, the Hyper Foundation has implemented a significant burn of 37 million HYPE tokens, amounting to over $912 million. This measure is designed to reduce the circulating supply and possibly stabilize or increase the token's price. With recent positive signs in the spot market and a shift toward buyer activity, the future of HYPE looks cautiously optimistic.

Key Takeaways

HYPE's value has dropped from $50 to approximately $23.94 amid market pressures.
The Hyper Foundation approved the burn of 37 million HYPE tokens, worth over $912 million, to enhance token scarcity.
Recent market activity shows positive net flows, suggesting reduced selling pressure.
A significant shift in market dynamics could help HYPE rebound, aiming for $30 and potentially $40.

Hyperliquid: Can $912 million in token burns help HYPE target $40?

Current Market Situation for HYPE

Hyperliquid has been navigating difficult times, recently hitting a peak of $50 nearly two months ago, only to see its token HYPE trade within a downward trend, reaching a local low of $22. Currently, HYPE is valued at $23.942, marking a 1.39% decrease on the daily chart and an 11.9% drop over the past week, indicating notable downward pressure.

In light of the intense selling pressure, the Hyper Foundation has intervened to help stabilize the situation.

Hyper Foundation's Token Burns

In a positive development for Hyperliquid, the Hyper Foundation conducted a stake-weighted governance vote which led to the decision to burn 37 million HYPE tokens. This burn translates to an impressive $912 million in value being removed from circulation.

The tokens burned were gathered in the Assistance Fund Addresses through buybacks initiated since December 2024, increasing from 9.3 million to a total of 37.51 million HYPE tokens.

Hyperliquid buybacks

The Hyper Foundation maintains a regular buyback strategy, averaging $1.5 million daily. For instance, just in the past week, they spent $12.4 million to acquire approximately 498.34k tokens.

The decision to burn these tokens came with an 85% approval rate from participants in the governance vote. Now, these tokens are stored in an unaccessible address, effectively reducing the total circulating supply by around 11-13% and tightening the overall tokenomics.

Hype average buybacks

This significant reduction enhances HYPE’s scarcity, which may help diminish selling pressure during market downturns. Historically, such deflationary actions have been associated with price increases for tokens.

Spot Market Shows Positive Signs

While HYPE has faced significant challenges, recent dynamics in the spot market indicate a potential cooldown phase. For several consecutive days, outflows from exchanges have consistently exceeded inflows, keeping the Spot Netflow positive. As of now, the Netflow stands at -$5.1 million, which indicates notable outflows.

Hyperliquid spot netflow

Typically, a decrease in exchange inflows alleviates pressure on an asset, thereby enhancing its potential for upward price movement.

Potential for a HYPE Rebound

Based on insights from AMBCrypto, the token burns appear to have alleviated some market strain, as reflected in the comparison of bullish and bearish movements. For the first time in over two weeks, buyers have outnumbered sellers, with the Average Bullish Move rising to 17 while the Bearish Move has decreased to -9.

HYPE average bullish and bearish moves

This situation indicates robust buyer momentum, even with sellers still active in the market. If this momentum continues, HYPE has a favorable chance of recovering. There’s potential for it to reach $30 and aim for $40 if the effects of the token burn resonate well and spot demand begins to increase. Conversely, if these deflationary efforts do not materialize successfully, HYPE could slip below the $20 support level and drop to around $19.