HYPE Soars as Battle for Hyperliquid's Stablecoin Future Begins

Hyperliquid's native token, HYPE, has surged to a new all-time high of $55.04, marking a 23.4% increase over the past seven days. The token briefly dipped to $53.70 before stabilizing amid growing interest in the platform's upcoming USDH stablecoin initiative. The Hyperliquid Foundation recently opened the floor for proposals from teams aiming to launch a stablecoin using the USDH ticker, with over 21 applications received, including notable entries from established stablecoin projects like Paxos, Frax Finance, and Agora.

Hyperliquid is a decentralized exchange (DEX) operating on its own layer-1 network, known for facilitating high-volume trading activity. Last month, the platform recorded $398 billion in perpetual derivatives trading volume and $20 billion in spot trades. USDC currently dominates liquidity on the network, making up 95% of the $5.6 billion stablecoin supply. However, the proposed USDH stablecoin aims to reduce Hyperliquid's reliance on external assets like USDC and USDT while enhancing the integration between trading, settlement, and liquidity within its derivatives platform. The foundation emphasized that the USDH stablecoin will not receive special privileges, and existing stablecoins will remain operational.

Validator voting for the USDH stablecoin proposals is set to begin soon, with teams having until Wednesday to submit their proposals through the Hyperliquid Discord channel. Among the proposals, some suggest models that would feed back into the Hyperliquid ecosystem. For instance, Native Markets’ proposal outlines sharing reserve proceeds with the Hyperliquid Assistance Fund, while Agora’s plan involves allocating 100% of its revenue to the Hyperliquid ecosystem. This mechanism underscores the broader aim of aligning the USDH stablecoin with the network’s economic model.

The growing interest in USDH has also sparked some controversy. Hyperstable, an existing Hyperliquid stablecoin protocol, raised concerns that teams like Native Markets may have received early insight into the USDH contest, which it deemed unfair. The debate reflects the competitive dynamics emerging in the stablecoin space, particularly as regulatory frameworks like the GENIUS Act reshape the environment.

Analysts have weighed in on the potential impact of Hyperliquid’s initiatives on the broader market. Jamie Elkaleh, Chief Marketing Officer at Bitget Wallet, noted that by anchoring a stablecoin to its native ecosystem, Hyperliquid reduces its dependence on external assets while reinforcing the link between trading, settlement, and liquidity. Ryan Lee of Bitget added that Hyperliquid’s HYPE token has emerged as a significant altcoin performer due to its unique value proposition in derivatives trading. The token now holds a $14.5 billion market capitalization, ranking as the 14th largest cryptocurrency.

Circle, the issuer of USDC, remains optimistic about its growth trajectory despite the emergence of competing stablecoin proposals. Bernstein analysts reaffirmed a $230 price target for Circle’s stock, asserting that any potential disruption from Hyperliquid’s USDH stablecoin will unfold gradually. They highlighted that USDC constitutes nearly 7.5% of its total supply as collateral on Hyperliquid’s futures platform but emphasized the challenges associated with bootstrapping liquidity for new stablecoins. The analysts also noted that USDC has gained a slight edge in market share against Tether’s USDT, holding 30% of the market today compared to 28% in the second quarter.