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.”
Considering this, the proposal outlined several key changes to Hyperliquid’s HYPE token supply to reduce those concerns and stabilize its market standing.
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 can clean its balance sheet and allow capital to flow more efficiently without the overhang of unused tokens.
The proposal also made a controversial call to scrap Hyperliquid’s fixed cap of one billion HYPE tokens.
According to the authors, HYPE’s hard cap is a cultural holdover from Bitcoin’s 21 million coin limit, which rests on a unique and immutable social contract.
The authors stated:
“If many years down the road the FECR had been exhausted, but there were value accretive opportunities requiring additional HYPE issuance, the community would very likely all be in favor of this. There’s no religious tie to an arbitrary supply cap here.”
