Hyperliquid Proposes Validator Vote to Exclude $1B HYPE in Assistance Fund from Supply
Hyperliquid’s foundation has proposed a validator vote to formally recognize roughly $1 billion of HYPE held in the protocol’s Assistance Fund as permanently inaccessible and exclude those tokens from circulating and total supply metrics. The Assistance Fund automatically converts trading fees and reserve yield (including 50% of USDH reserve yield) into HYPE and routes them to a system address designed without control mechanisms, making recovery impossible except by a hard fork. The proposal would not change on‑chain balances or perform an on‑chain burn but would treat Assistance Fund HYPE as effectively removed for governance, reporting and circulating‑supply calculations. Cantor Fitzgerald research cited in coverage estimates about $874M in protocol fees YTD (2025) with ~99% of fees flowing to the Assistance Fund, driving automated repurchases and a shrinking effective circulating supply. Hyperliquid remains a major perpetual DEX (DefiLlama: >$205B 30‑day volume); several DAT treasuries hold significant HYPE exposure (examples: PURR, HYPD). The later report adds on‑chain sentiment: whale activity shifted from strongly bearish in mid‑November to slightly bearish recently, with large addresses holding both big long and short positions while smaller wallets are strongly bullish. The validator vote is pending; if passed it would clarify governance accounting, likely tighten effective HYPE supply metrics and could have secondary effects on USDH dynamics because half of USDH reserve yield is routed to the Assistance Fund and converted to HYPE.
Bullish
Classifying the impact as bullish focuses solely on HYPE price implications. The proposal formally excludes ~ $1B of HYPE held in the Assistance Fund from circulating and total‑supply metrics without altering on‑chain balances. In practice this reduces the effective circulating supply used for governance and reporting, which is commonly perceived as supply tightening — a bullish driver for token price if demand remains constant or increases. Cantor Fitzgerald’s estimates that most protocol fees (>99%) flow to the Assistance Fund and that automated repurchases have already been reducing effective supply reinforces a scarcity narrative. Short‑term effects: price may react positively on the vote announcement or a ‘Yes’ outcome as traders price in lower effective supply and reduced issuance risk; volatility could spike around the vote and if any market participants hold large HYPE positions or DAT treasuries rebalance. Medium‑to‑long term: if the exclusion becomes standard practice and USDH yield routing continues to feed the Assistance Fund, automated conversions to HYPE could create persistent downward pressure on circulating supply growth, supporting higher price floors. Risks that temper the bullish view: no on‑chain burn means the tokens remain nominally recoverable by a hard fork, which preserves a tail risk; institutional holders with large exposures (DAT treasuries) could rebalance or sell into rallies, and shifting whale sentiment (mixed longs/shorts) can add downside pressure. Overall, the net supply tightening narrative makes the immediate price impact likely bullish for HYPE, but watch governance outcome, whale activity and USDH reserve flows for volatility triggers.