Hyperliquid’s Yield-Bearing USDH Challenges USDC’s Stablecoin Supremacy

Hyperliquid has launched the HYPE/USDH spot trading pair, marking a significant step in the platform’s strategy to internalize value generation within its ecosystem. The stablecoin, USDH, is Hyperliquid’s native USD-pegged asset designed to recapture over $220 million annually in Treasury yields previously lost to external issuers like Circle. By converting its $5.6 billion in USDC deposits into USDH, Hyperliquid aims to redirect these earnings toward HYPE token buybacks, user rewards, and the Assistance Fund, enhancing token utility and economic sovereignty for its community . The platform’s validator vote on September 14, 2025, selected Native Markets as the issuer of USDH, which will be backed by cash and U.S. Treasury equivalents and managed through Stripe’s Bridge platform .

The USDH stablecoin introduces a competitive edge by offering yield-bearing features, a stark contrast to Circle’s USDC, which cannot legally distribute interest to holders under U.S. regulations. This differentiator positions USDH as a key player in decentralized finance (DeFi), where yield generation is a primary driver of liquidity. Native Markets’ proposal, which splits reserve yields equally between HYPE buybacks and ecosystem development, underscores the alignment of incentives between the issuer and Hyperliquid’s stakeholders. Competing bids from Paxos, Ethena, and Frax offered higher revenue shares (95-100%), but validators prioritized ecosystem integration and technical compatibility over financial incentives .

Hyperliquid’s move to launch USDH reflects a broader shift in the stablecoin landscape, where protocols are increasingly asserting control over their economic models. The stablecoin’s integration with Hyperliquid’s HyperEVM layer ensures seamless on-chain transactions and reduced trading fees—80% lower than other stablecoin pairs on the platform. This operational efficiency, combined with USDH’s 1:1 redeemability and over-collateralization safeguards, addresses concerns about depegging risks during market volatility . Institutional adoption is further bolstered by FalconX’s custody support, which provides institutional-grade infrastructure for HYPE and USDH .

The launch of USDH also intensifies competition with USDC and USDT, which together dominate over 90% of the stablecoin market. Hyperliquid’s strategy to capture a portion of this market hinges on its ability to attract liquidity through yield-bearing incentives and governance-driven fee adjustments. While Circle has responded by integrating native USDC into Hyperliquid, the platform’s existing reliance on external stablecoins highlights the strategic importance of USDH in reducing censorship risks and enhancing platform resilience . Analysts note that USDH’s success will depend on its ability to migrate $5.6 billion in USDC deposits while maintaining stability amid regulatory scrutiny and macroeconomic headwinds .

For HYPE token holders, the USDH launch presents both opportunities and challenges. The 45% supply cut proposal, which seeks to burn 421 million tokens, aims to counterbalance the $12 billion in token unlocks scheduled over the next 24 months. While this measure could enhance scarcity, it also raises questions about the impact on ecosystem incentives and token distribution. Current market dynamics reflect this tension, with HYPE trading at $47–$49 as of July 2025, up from $3.81 in November 2024 . Institutional investors, including Arthur Hayes’ Maelstrom Fund, are closely monitoring whale activity and the platform’s ability to defend its 70% share of DeFi perpetuals trading volume .

[1] Hyperliquid’s Native Stablecoin USDH - What You Need to Know (https://www.stablecoininsider.com/hyperliquids-native-stablecoin-usdh/)

[2] Hyperliquid launches USDH stablecoin issued by … (https://cointelegraph.com/news/hyperliquid-stablecoin-goes-live-after-fierce-bidding-issuance-rights)

[3] Hyperliquid’s USDH vs Circle’s USDC: Stablecoin Battle After $1.2B … (https://www.ccn.com/education/crypto/hyperliquid-usdh-challenges-usdc-circle-1-2b-ipo-revenue-risk/)

[4] What Is USDH? A Deep Dive into Hyperliquid's Native … (https://www.coingecko.com/learn/what-is-usdh-hyperliquid-native-stablecoin)

[5] Hyperliquid in 2025: HYPE Price, On-Chain Trading, and DeFi Impact (https://www.gate.com/blog/8803/hyperliquid-in-2025-hype-price-on-chain-trading-and-defi-impact)

[6] Hyperliquid Unlock: $12B Supply Raises Market … (https://thecurrencyanalytics.com/altcoins/looming-12b-hyperliquid-unlock-raises-questions-about-market-impact-199872)

[10] Hyperliquid Price Prediction 2025: Analysis and Forecast (https://levex.com/en/blog/hyperliquid-price-prediction)