Hyperliquid (HYPE) Faces Bearish Crossroads: Structural Selling and Market Sentiment Weigh on Near-Term Trajectory

Hyperliquid (HYPE), once a poster child for DeFi innovation, now finds itself at a critical juncture. While the token's institutional adoption and fee-driven buyback model have fueled a $14.7 billion market capitalization as of August 2025, according to an OnTheNode analysis, mounting bearish signals and structural selling pressure threaten to derail its upward trajectory. This analysis dissects the confluence of on-chain dynamics, technical indicators, and market fundamentals that suggest a near-term correction for HYPE.

On-Chain Weakness and Whale Exodus

Hyperliquid's on-chain activity in 2025 reveals a troubling narrative. The Network Value to Transactions (NVT) ratio-a metric comparing market cap to transaction volume-has surged to levels historically associated with overvaluation, per a Levex analysis. Simultaneously, transfer volume has declined, signaling reduced user activity and weakening demand, as detailed in an OAK Research report. Compounding this, large holders (whales) have been systematically offloading positions, with on-chain data showing a 45% increase in large HYPE token sales in Q3 2025, according to the Levex analysis. This exodus has eroded liquidity, making the token more susceptible to volatility.

A case in point: the December 2024 stablecoin heist, where a hacker sold 100,000 HYPE tokens for $4.4 million in DAI, briefly spiking selling pressure, as detailed in a FinancialContent report. While the market absorbed this shock, the incident exposed vulnerabilities in Hyperliquid's ecosystem, further eroding confidence.

Technical Indicators Signal Divergence

Technically, HYPE's price action paints a mixed picture. While the ascending triangle pattern suggests potential for a breakout above $48, recent price tests of this level have failed, with the token retreating to consolidate near $50.74 as of October 3, 2025-the OnTheNode analysis highlights these tests. More concerning, the Relative Strength Index (RSI) and stochastic oscillator show bearish divergences-rising price lows paired with declining momentum-hinting at exhausted buyers, a point also noted in the OnTheNode analysis.

The On-Balance Volume (OBV) metric, which tracks cumulative buying pressure, has also stalled, failing to confirm the recent 25.76% 7-day price surge reported by OnTheNode. This disconnect between volume and price suggests speculative inflows are losing steam, a red flag for short-term traders.

Market Dynamics: Burn Proposals vs. Unlock Risks

Hyperliquid's tokenomics overhaul-a proposed 45% token burn-aims to counteract supply-side pressures, per a CoinMarketCap prediction. However, this initiative faces an existential challenge: a $11.9 billion team unlock scheduled for November 2025. Such a massive liquidity event could overwhelm the buyback mechanism, creating a "race to the bottom" as sellers flood the market.

Meanwhile, competition from rivals like Aster, which captured 50% of perpetual DEX volume in Q3 2025 (per the CoinMarketCap prediction), adds further downward pressure. Hyperliquid's dominance in the space is eroding, and without a clear product differentiation, the token risks losing its premium valuation.

Structural Catalysts for a Downtrend

The bearish case gains strength from structural catalysts:
1. Fee-to-Buyback Fatigue: While Hyperliquid's 97% fee redistribution model has historically supported HYPE's price, the $3.7 million daily revenue stream is now insufficient to offset selling pressure from whale exits and the impending team unlock, as noted in the Levex analysis.
2. Regulatory Uncertainty: Although Hyperliquid's engagement with the CFTC and Bitwise's spot ETF filing offer bullish tailwinds (outlined in the CoinMarketCap prediction), regulatory scrutiny remains a wildcard. A misstep could trigger a liquidity crisis.
3. Absorption Ratio Deterioration: The absorption ratio-a measure of how efficiently the market processes sell orders-has dipped to critical levels, indicating that HYPE's price may soon face a "freefall" if institutional buyers disengage, a risk underscored by the FinancialContent report.

Path Forward: A Test of Resilience

Hyperliquid's near-term fate hinges on its ability to navigate these headwinds. A critical support level at $35.418 will be pivotal; a break below this could trigger a cascade to $25.416, erasing much of 2025's gains, according to TheNewsCrypto prediction. Conversely, a rebound above $57.615 resistance could rekindle bullish momentum, but this would require a surge in institutional buybacks or a breakthrough in product innovation.

Conclusion

Hyperliquid (HYPE) stands at a crossroads. While its fee-driven model and Ethereum compatibility via HyperEVM remain compelling, the confluence of bearish on-chain metrics, whale selling, and looming unlock risks paints a cautionary picture. Investors should brace for volatility, with key technical levels and regulatory developments serving as critical inflection points. For now, the weight of the evidence tilts toward a near-term correction, making HYPE a high-risk, high-reward proposition in the fourth quarter of 2025.