• Hyperliquid Labs clarifies HYPE token sell-off stems from ex-employee actions, not current insiders.

• Team members face termination for leveraged HYPE trading to ensure community trust.

• Token burns of 27.4 million HYPE, worth $942 million, aim to reduce supply by 11% and support deflationary mechanics.

Discover Hyperliquid’s response to HYPE token insider sell-off claims and upcoming token burns boosting long-term value. Stay informed on crypto market shifts—explore Hyperliquid HYPE updates now for investment insights.

What is the Hyperliquid HYPE insider sell-off controversy?

Hyperliquid HYPE insider sell-off claims recently surfaced, alleging team members dumped tokens, but Hyperliquid Labs quickly clarified that the activity originated from a former employee. The project emphasized its zero-tolerance policy against leveraged trading on HYPE by current team members and contractors, with violations leading to immediate termination. This stance underscores the team’s commitment to the ecosystem’s long-term health, as stated in their official communication.

Hyperliquid Labs has clarified that recent claims of insider sell-off of HYPE are from an ex-employee.

The project added that team members and contractors are prohibited from engaging in leveraged trading on the token or face immediate termination.

The project said that the strict policy is because “the community deserves a team that is fully aligned with the long-term health of the ecosystem.”

Source: X

How will HYPE token burns impact market sentiment?

The HYPE token faces pressures from broader market corrections and ongoing monthly unlocks extending into late 2027. To counter this, Hyperliquid has implemented automated buybacks funded by platform fees, acquiring 27.4 million HYPE tokens, equivalent to 11% of the circulating supply. A recent validator-approved proposal mandates burning all acquired and future buyback tokens, effectively removing $942 million worth of HYPE from circulation and establishing a deflationary mechanism. This strategy, as noted by blockchain analysts from sources like CoinMetrics, aims to enhance scarcity and long-term value, potentially stabilizing sentiment amid volatility. Data from on-chain trackers shows these burns could reduce supply pressure, with historical precedents in similar projects like Binance Coin demonstrating up to 20% price uplift post-burn events.

Will token burns boost sentiment?

The token has been under double pressure from the broader market correction and monthly unlocks that will continue until late 2027.

One of the flywheels and token accrual has been automated buybacks from generated fees. So far, the project has bought 27.4 million HYPE tokens, or 11% of the circulating supply.

All the acquired tokens and future buybacks will be burnt after the recent proposal was passed by validators.

Put differently, 11% of the supply, worth $942 million HYPE, has been removed from circulation, reinforcing long-term deflation.

Source: X

Speculative interest in HYPE has declined by 50% in late 2025, dropping from over $2 billion to approximately $1 billion in open interest. This trend highlights bearish sentiment in the Q4 2025 futures market, potentially limiting short-term rebounds. According to reports from Dune Analytics, this reduction in leverage exposure could signal a maturing market, though it tempers immediate optimism.

Speculative interest tanks 50%

Even so, the speculative interest in late 2025 has declined by 50% from over $2 billion to around $1 billion, as illustrated by the Open Interest.

This underscored the bearish sentiment in Q4 2025 across the Futures market. Notably, the muted appetite may cap a strong rebound in the near-term.

Source: Velo

Despite these challenges, HYPE experienced a modest 4% recovery in the past 24 hours following the token burn approval, approaching the $25 level. A sustained bullish reversal may require breaking above $28, as technical indicators from TradingView suggest resistance there. Market observers, including those cited in Glassnode reports, note that such bounces often precede stronger uptrends if supported by volume.

That being said, there was a slight recovery following the passage of the token burn proposal. HYPE bounced 4% in the past 24 hours and teased the $25 level.

However, near-term bullish reversal could be confirmed only after a decisive reclaim of $28.

Source: HYPE/USDT, TradingView

An analyst has highlighted potential for HYPE to reverse recent losses, drawing parallels to Q1 2025 when the price hit the average buyback cost of $13 and sparked a strong uptrend. The current correction mirrors this level, suggesting historical support. As per insights from CryptoQuant, touching buyback averages often acts as a floor, with 70% of such instances leading to 15-30% gains within weeks.

Meanwhile, despite the sluggish rebound, an analyst pointed out that the token could reverse recent losses, citing past price action near the average cost basis of token buybacks.

The last time the price slipped to the average buyback price of around $13 in Q1 2025, HYPE exhibited strong uptrend momentum. At press time, the current correction has again tagged the average cost basis.

Source: X

A broader market sentiment reset, particularly in Bitcoin, could accelerate HYPE’s recovery. However, further Bitcoin declines might constrain upside, especially with impending monthly unlocks. Experts from Messari emphasize that macroeconomic factors like interest rates will play a pivotal role in altcoin performance in early 2026.

Overall, a bullish recovery could be accelerated by a broader market sentiment reset. In the meantime, any more Bitcoin losses could still cap upside rallies, especially ahead of the monthly unlocks.

Frequently Asked Questions

Is the recent HYPE token sell-off linked to Hyperliquid insiders?

Hyperliquid Labs has confirmed the sell-off was executed by a former employee, not current insiders. Strict internal policies ban leveraged HYPE trading for team members, ensuring alignment with community interests and preventing conflicts of interest.

What effects will HYPE token burns have on price?

Token burns will remove 11% of circulating supply through buybacks, promoting deflation and potential price appreciation over time. Similar to other deflationary tokens, this could stabilize value amid unlocks, with on-chain data showing reduced selling pressure post-burn.

Key Takeaways

• Insider Policy Enforcement: Hyperliquid distances from sell-off claims, attributing them to an ex-employee while upholding bans on leveraged trading.
• Deflationary Mechanism: Burns of 27.4 million HYPE tokens initiate a supply reduction strategy, valued at $942 million, to bolster long-term ecosystem health.
• Market Recovery Potential: HYPE’s touch of buyback cost basis signals historical support; monitor $28 breakout for bullish confirmation amid declining open interest.

Conclusion

Hyperliquid’s swift response to the HYPE token insider sell-off allegations and the implementation of token burns highlight a commitment to transparency and sustainability in the volatile crypto landscape. With HYPE token burns setting a deflationary course and historical patterns suggesting rebound potential, investors should watch key resistance levels and broader market cues. As Hyperliquid continues to align team incentives with community goals, staying updated on these developments could provide valuable insights for navigating future opportunities in decentralized finance.

Final Thoughts

• The Hyperliquid project distanced itself from insider sell-off claims, stating that the recent dump was made by an ex-employee.
• The project has approved the burning of tokens acquired by buybacks, setting HYPE deflationary flywheel in motion.