Using USDC reserve earnings for buybacks, how far can HYPE go after reaching a new high?

Author: Zhou, ChainCatcher

In late August, HYPE soared, reaching a peak of about $83.5, setting a new historical high, and is currently quoted around $82, with a 37.5% increase over the past 7 days and a cumulative increase of over 220% for the year.

According to hl.eco data, as of now, the protocol has accumulated a net income of about $1.27 billion, corresponding to approximately 48.17 million HYPE tokens burned on-chain.

About 99% of the platform's transaction fees continue to be used for repurchasing and burning HYPE, providing a built-in buying pressure for the price. The AQAv2 mechanism launched on August 26 will also add a new funding source for repurchases from USDC reserve earnings.

On the policy front, on August 19, Trump stated that CFTC Chairman Selig is promoting Hyperliquid to enter the U.S. in a fully compliant manner. Meanwhile, the Hyperliquid policy center has frequently submitted opinions to the SEC and CFTC in August regarding pre-IPO perpetuals, stock perpetuals, and energy perpetuals.

On the funding side, the HYPE spot ETF has seen a cumulative net inflow of about $301 million since its launch. On August 20, following Trump's statement, there was a single-day net inflow of about $5.8 million, and on August 26, it recorded another approximately $14.7 million. The HYPE treasury company PURR is also continuing to increase its holdings in the open market.

Riding this new high, this article attempts to examine the quality of Hyperliquid's recent price increase from three dimensions: supply side, demand side, and fundamentals.

Supply Side: A Tug of War Between Repurchase and Unlocking

The supply side determines whether HYPE's chips are becoming looser or tighter. Hyperliquid automatically converts about 99% of transaction fees into HYPE and deposits them into an Assistance Fund address that has no private keys and cannot be accessed by anyone, effectively locking them permanently. In December 2025, validators will confirm with 85% of the votes that these tokens are considered burned.

According to hl.eco data, the protocol has accumulated revenue of about $1.27 billion, corresponding to approximately 48.17 million HYPE tokens burned on-chain, accounting for 4.82% of the 1 billion token cap, with these tokens valued at about $3.9 billion at current prices.

This repurchase is continuously being intensified, directly driven by increasing revenue. According to Blockworks statistics, Hyperliquid's revenue for the past week was about $16.93 million, a 196% increase from the previous week. The higher the revenue, the more funds are invested in repurchases.

In addition to transaction fees, there is now an additional source of funds for repurchases. Traders opening perpetual contracts on Hyperliquid use almost entirely USDC as margin, and currently, there are over $5 billion in USDC deposits on the platform, backed by interest-bearing assets like U.S. Treasuries, generating considerable interest.

On August 26, Hyperliquid launched the AQAv2 (Aligned Quote Asset v2) mechanism, using part of the earnings generated from the USDC reserves to accumulate funds, which will ultimately be transferred to the assistance fund for repurchasing and burning HYPE in the secondary market to reduce its circulating supply.

Under this mechanism, Circle is responsible for USDC technical deployment, and Coinbase is responsible for reserve management; the stablecoin issuer is expected to share about 90% of the related reserve earnings after deducting operational costs with the protocol. The first tranche of about $20 million is expected to arrive on October 3, with an anticipated additional repurchase scale of $135 million to $160 million per year.

As a result, repurchases are no longer solely reliant on transaction fees; every dollar of USDC deposited on the platform also begins to contribute to buying pressure for HYPE.

On the other side of buying is unlocking. HYPE is released monthly, and since March 2026, the proportion of single unlocks relative to market value has decreased from about 3.3% to about 2.7%. On August 29, approximately 14.18 million tokens, worth about $1.1 billion, will be unlocked, accounting for about 1.4% of the total supply, equivalent to about 6% of the current circulating supply; of which about 46.6% belongs to early insiders, 46.3% to the community, and 7% to the foundation.

Historically, prices usually come under pressure before and after each unlocking. According to Tokenomics statistics, HYPE has averaged a decline of about 8.6% in the 7 days following recent unlocks, with some months seeing maximum drawdowns of 20-30% within two weeks post-unlocking; however, these deep declines often coincide with overall market downturns and are not solely caused by unlocking.

Whether repurchases can withstand the pressure of unlocking can be roughly estimated. At the current repurchase scale of about $60 million to $80 million per month, even if all unlocked tokens are sold in the short term, it can only offset about 6% to 7% of that.

Thus, the short-term pressure on the supply side comes from the unlocking at the end of the month, with the variable being whether the market can digest the new supply; the medium-term support comes from transaction fee repurchases and the arrival of AQAv2 on October 3.

Demand Side: Who is Creating New Buying Reasons for HYPE?

Currently, the price of HYPE has reached a historical high, and the next question is: Are there new funds and users willing to enter?

The biggest potential still lies in compliant entry into the U.S. On August 19, Trump stated at the White House that CFTC Chairman Selig is promoting Hyperliquid to "enter the U.S. in a fully compliant and legal manner." Hyperliquid is currently not open to U.S. users, and once the statements turn into executable paths, it will open up a new incremental market for U.S. retail and institutional investors.

The Hyperliquid policy center has repeatedly submitted opinion letters to the SEC and CFTC, covering pre-IPO perpetuals, stock perpetuals, and energy perpetuals, with the core demand being to regulate these contracts with futures characteristics and cash settlement as securities futures.

Binance founder Changpeng Zhao recently expressed optimism at a blockchain seminar in Wyoming, believing that if Hyperliquid can enter the U.S. in compliance, it will open up space for more decentralized products, benefiting the entire industry.

However, these developments are still at the level of opinion letters and verbal statements. Trump's mention does not equate to CFTC approval; a more likely implementation method is to allow licensed institutions to access HyperCore through a licensed version of HIP-3. This part of the premium is rising the fastest and is also the easiest to give back.

On the distribution side, Coinbase is the official deployer of the platform's USDC reserves and has increased its HYPE staking; the Base App has integrated Hyperliquid, offering eligible users up to 50x leverage across more than 200 perpetual markets. Coinbase does not directly buy HYPE, but its larger transactions will turn into transaction fees, which will then be used for repurchases.

Further up is HIP-3. This mechanism has opened up the listing rights; as long as about 500,000 HYPE are staked, the team can independently list a new contract market, with a cumulative nominal transaction volume exceeding $480 billion, over 90% of which is concentrated in trade.xyz.

Recently, HIP-3 welcomed a high-profile new player, EntropyIO. It secured a $14 million funding round led by Ribbit Capital, staking $40 million in HYPE, with team members from institutions like Citadel Securities, Optiver, Millennium, and Polymarket, launching Anthropic's pre-IPO market on its first day, surpassing $40 million in transactions within half a day.

Blockworks analysts believe that EntropyIO may pose the first real threat to TradeXYZ's dominance. However, some analysts point out that HIP-3 will spark fierce liquidity competition among deployers, which may not be friendly to newcomers. But the entry of newcomers will improve products for users; for the Hyperliquid ecosystem, it truly represents 1+1>2.

At the same time, there are signs that Kraken is also testing a compliant version of HIP-3 on the testnet, and traditional futures exchange CME has begun publicly discussing the impacts brought by trade.xyz and Hyperliquid.

In contrast, HIP-4 is still in its early stages. It benchmarks the on-chain prediction market Polymarket, with a total historical transaction volume of about $310 million and about 1,000 daily active traders. On August 25, founder Jeff updated three features, including sub-deployer authorization, but the overall transaction volume remains small.

Institutional funds are steadily entering through compliant channels. The HYPE spot ETF has seen a cumulative net inflow of about $301 million since its launch, with a total net asset value of about $409 million. The publicly listed treasury company PURR currently holds about 29.35 million HYPE, accounting for about 2.94% of the total supply, with a net value gain exceeding $1 billion, and it continues to increase its holdings in the open market.

Fundamentals: Is There Cash Flow Support Beneath the Price?

According to ASXN data, Hyperliquid has accumulated a transaction volume of about $5.27 trillion, with approximately 1.71 million registered users and current open contracts of about $13.4 billion, growing about 24% in the past month.

In the perpetual DEX space, Hyperliquid currently holds about 40% market share, firmly in first place, with the following Lighter and Aster achieving less than a quarter of its daily transaction volume.

At the same time, the asset structure on Hyperliquid is migrating towards RWA. According to ARK Invest statistics, in July this year, RWA transactions once surged to 54%, surpassing crypto assets for the first time. Currently, about 29.8% of perpetual transactions on Hyperliquid come from RWA, with a 24-hour transaction volume of about $2.9 billion.

On the revenue side, Hyperliquid has an annualized revenue of about $748 million, making it a rare cash cow in the crypto industry. Ecosystem usage is also expanding, with HyperEVM once generating a single-day transaction fee revenue of $538,100, all of which was burned.

However, the fundamentals are not without concerns. HIP-3 is currently highly concentrated, with the vast majority of transactions still coming from the trade.xyz deployer, which can take about 50% of the transaction fees in its market. This means that although transactions are hitting new highs, the protocol's retained revenue may not grow proportionally. Whether new players like EntropyIO and Kraken can break trade.xyz's monopoly is key to this line going forward.

There are also controversies within the ecosystem. The ecosystem party Kinetiq recently proposed to create a Layer 2 called Elysium, which was once highly sought after by the market. Analysts like y_cryptoanalyst pointed out that Elysium was proposed by Kinetiq and is not an official project, but rather a narrative borrowing from HyperEVM's popularity. In fact, the application layer of HyperEVM has always been weak, with transactions highly concentrated in the official HyperCore, leaving limited space for third-party applications, making it unlikely for the official team to personally develop an L2.

Conclusion

Bringing these three lines together, the logic behind HYPE's recent highs is roughly clear. Policies have provided it with valuation elasticity, repurchases have given it a supply-demand foundation, and fundamentals have provided it with rationality. The ecosystem research institution GLC Research bluntly stated that the current buying pressure for HYPE is rare, and the price may soon reach triple digits.

Overall, HYPE has become an indispensable target in the crypto market. Publications like Fortune and Bloomberg frequently report on Hyperliquid, indicating that it is becoming a competitor that Wall Street must take seriously.

However, some analysts point out that the more U.S. regulators embrace Hyperliquid, the more favorable it is in the short term, but once regulation deepens, its original advantages of not requiring account opening, KYC, and direct wallet connections may also be gradually weakened.