Key Takeaways
Hyperliquid’s HYPE token is set to face a significant market test on May 25, with a scheduled unlock of 7.8 million tokens that will substantially increase the circulating supply.
The unlock forces a direct confrontation with the mechanics that have driven HYPE to recent all-time highs. Forbes contributor Zennon Kapron argues that a protocol-level buyback mechanism, not recent ETF launches, is the primary driver of the token's price, a mechanism that now faces its biggest test.
The core of the issue is a divergence between the token’s price and the engine that powers it. While HYPE touched a record high above $62 on May 21, the protocol's own buybacks have been shrinking, falling from $316.76 million in Q3 2025 to $192.25 million in Q1 2026, a drop of nearly 40 percent in two quarters, according to protocol data.
The upcoming release of 7.8 million HYPE tokens will test whether the market’s demand can absorb a sudden supply shock, especially as the primary buyer—the protocol itself—is already reducing its purchasing volume. This event will reveal how much of HYPE’s valuation is sustained by organic demand versus its own reflexive buy-side pressure.
Hyperliquid’s tokenomics are built around a continuous buyback program called the Assistance Fund. This mechanism directs approximately 99 percent of all trading fees from the decentralized exchange into open-market purchases of HYPE. Since its launch, the fund has recycled over $1.16 billion in protocol revenue back into acquiring its own token.
This automated buying is a powerful and constant source of demand, operating on a scale that dwarfs the tens of millions in inflows from recently launched spot HYPE ETFs. The structure is reinforced by two other capital streams: a publicly traded treasury company, Hyperliquid Strategies (PURR), designed to accumulate and hold HYPE, and yield from USDC reserves held on the platform, which also funnels back into buybacks.
The system that amplified gains on the way up, however, also withdraws support on the way down. The buybacks are funded by trading volume, a notoriously cyclical metric in crypto markets. A downturn in perpetual futures trading would cause the buyback pressure to contract, removing support precisely when holders would need it most.
The May 25 unlock adds another layer of pressure to this dynamic. By increasing the token's circulating supply, the Assistance Fund will need to absorb a greater amount of potential selling just to keep the price stable. An increase in the token float arriving alongside a decrease in buyback funding creates a compounding risk, testing the conviction of investors who have bought into the token’s recent rally.
This article is for informational purposes only and does not constitute investment advice.
