Hyperliquid unlocks 1.2 million HYPE! Countdown to dump on January 6

Hyperliquid Labs has unstaked approximately 1.2 million HYPE tokens, which will be distributed to the team on January 6th, valued at $31.2 million. However, earlier this month, the Hyper Foundation proposed to burn $1 billion worth of HYPE, leading to questions about the two simultaneous operations. The plan for the 237 million tokens reserved for core contributors has never been fully disclosed, and the team also revealed that equity grants are not a linear process.

Timeline Contradictions Behind Hyperliquid’s 1.2 Million HYPE Unstaking Event

According to an official Discord announcement, this batch of 1.2 million HYPE tokens has “been unstaked” and will be distributed to team members on January 6th. The act of unstaking itself reveals important information: these tokens were previously staked, possibly participating in Hyperliquid’s validator or governance mechanisms. Unstaking typically requires a cooling-off period, implying that the team decided to release these tokens weeks ago, not a last-minute decision.

The timeline contradiction lies in the fact that HYPE was officially launched only in November 2024, with the first team allocation on November 29th, and just over a month later, a second unlock occurred. According to DeFi Llama data, the 237 million tokens reserved for core contributors should have experienced a one-year freeze followed by a 24-month lock-up plan. Strictly following this schedule, team tokens should only begin unlocking in November 2025, not now.

This discrepancy may stem from two scenarios. First, different team members’ vesting schedules started at different times; early core members may have begun accumulating vesting periods before the token’s public launch. Second, the disclosed vesting terms may differ from actual implementation, and this opacity is a core concern for the market. Hyperliquid co-founder iliensinc announced, “In the future, token distributions will occur on the 6th of each month,” but did not specify the exact monthly unlock amounts or remaining vesting periods.

In terms of quantity, the first distribution was 1.75 million tokens, the second 1.2 million, a 31% difference. If the 237 million tokens are linearly released over 36 months, the average monthly release should be about 6.6 million tokens, but actual unlocks are much lower. This suggests the vesting curve may be front-loaded, with slower releases early on and acceleration later, or that most team members’ vesting periods have not yet begun. Either way, this introduces significant uncertainty about future monthly unlocks.

Three Opaque Traps in HYPE Team Token Vesting Mechanism

Currently, about 238 million HYPE tokens are in circulation, out of a total supply of 1 billion, meaning over 61% are still locked. Besides the 237 million reserved for the team, many other tokens’ purposes and release plans remain undisclosed. This high lock-up ratio creates potential selling pressure; if large-scale unlocks occur and the market cannot absorb them, HYPE’s price could experience sharp volatility.

The genesis token distribution immediately rewarded the community with about 310 million tokens (31%), and core contributors reserved 237 million (23.8%), totaling 54.8% of the total supply. The remaining 45.2% of tokens’ uses are unclear, possibly including future ecosystem incentives, strategic partner allocations, or exchange reserves. When these undisclosed tokens will enter circulation is the biggest unknown in HYPE’s tokenomics.

Core Doubts About the Vesting Plan

The Truth About the Lock-up Period: Officially, a 1-year lock-up is claimed, but distribution started immediately after the November launch, which is inconsistent. Early members’ vesting start times may be well before the public issuance, meaning the actual lock-up period has already ended.

Risks of Non-Linear Unlocking: Team members have explicitly stated that “equity grants are not a linear process,” implying that some months may see large, concentrated unlocks, while others see little. The market cannot predict which months will have high selling pressure.

Lack of a Complete Timeline: Although iliensinc promised monthly distributions on the 6th, a full vesting schedule has never been disclosed. The Block has contacted Hyperliquid for more information but has not received a response as of press time. This information asymmetry puts investors at a disadvantage.

The True Intent Behind the $1 Billion Burn Proposal

(Source: The Block)

Earlier this month, Hyper Foundation proposed to burn approximately $1 billion worth of HYPE tokens by directing transaction fees to inaccessible addresses via an aid fund. Valued at $26 per token, $1 billion corresponds to about 38.5 million tokens, which is 32 times the unlock volume on January 6th. Numerically, this burn scale could offset several years of future team unlocks, but the market remains skeptical of the “unlock on one hand, burn on the other” approach.

The aid fund’s automated mechanism depends on sustained trading volume. Only when Hyperliquid generates enough trading fees can the burn continue. However, according to The Block, despite Hyperliquid remaining the largest decentralized perpetual contract DEX, its market share is shrinking due to the rise of competitors like Lighter on Ethereum and Aster on BNB Chain. If trading activity declines, the burn rate will slow, reducing its hedging effect.

The timing of the burn proposal is noteworthy. Amid the imminent large-scale team unlocks, the foundation suddenly announced a massive burn plan, seemingly to quell market concerns. However, the effectiveness of this strategy depends on execution details. Will the burn be a one-time event or staged? How long will governance processes take? The lack of this information makes it difficult for the market to assess its true impact.

A deeper issue is why the team did not consider the balance between unlocks and supply during the tokenomics design, but instead resorted to large-scale burns less than two months after launch. This post-hoc remedy reflects flaws in the token economic model or misjudgment of market capacity. For investors, this uncertainty is a risk factor to consider when evaluating HYPE’s long-term value.

Three Major Risk Signals Investors Should Watch

First, the lack of a complete vesting schedule. Without a clear roadmap, the market faces monthly unknown unlock pressures, which can suppress price growth. Second, the non-linear unlocking mechanism may cause concentrated selling in certain months, and if market liquidity is low, it could trigger a waterfall decline. Third, rising competition threatens Hyperliquid’s trading volume; if platform activity drops, the aid fund’s burn effect diminishes, disrupting supply-demand balance.

Currently, HYPE trades at about $26, with a market cap of $6.2 billion, and a fully diluted valuation of $25.1 billion. This huge valuation gap reflects market concerns over future unlocks. For holders, closely monitoring each month’s 6th unlock announcements, tracking Hyperliquid’s trading volume changes, and paying attention to competitors’ market share are key to managing risks.