Can one comment bring down a cryptocurrency project? Perhaps the best example of this is the recent controversy surrounding the Hyperliquid token. Its declines were caused by, among others, statement by the platform’s co-founder regarding pay-to-play mechanisms and the related centralization.
Czm is a Hyperliquid (HYPE) token
The HYPE token, also known as the Hyperliquid token, is a new cryptocurrency asset that debuted on stock exchanges on November 29, 2024. HYPE is the centerpiece of the Hyperliquid ecosystem, enabling ultra-fast transactions and low fees. It serves as a staking asset for consensus and as a “gas” token for the HyperEVM layer, compatible with the Ethereum Virtual Machine. It gained popularity in a short time, achieving a significant increase in value of over 50% within a week and 134% within two weeks of its debut.
It is worth adding that the token has been struggling with significant declines since the beginning of the year. The token’s TVL (Total Value Locked) dropped by 20%, reaching $1.89 billion (the lowest since January 1). This decline contrasts with the overall upward trend in the DeFi sector, where TVL has increased by 1% over the last seven days and now stands at $120 billion.
Reasons for the decline in TVL HYPE
A drop in TVL often indicates less user activity on the platform. In the case of Hyperliquid, data from DefiLlama also reveals a 19% reduction in trading volume over the past week. The decreasing number of investors translates into an outflow of capital from the platform and a lower value of blocked assets.
The HYPE token, the native asset of the Hyperliquid platform, has also been affected by these changes. The token’s value has dropped 10% over the last seven days, and the Relative Strength Index (RSI) is currently at 35.72, indicating strong selling pressure. This means that HYPE is in the oversold zone and further declines are very likely. The last statement by the platform’s co-founder did not help either.
Controversy around centralization – comment by Ryan Lee from Bitget Research
Hyperliquid has come under fire for alleged centralization. Members of the cryptocurrency community emphasize that this approach may favor larger players at the expense of small investors. Ryan Lee, Chief Analyst at Bitget Research, also commented on this matter:
Hyperliquid’s recent comments about centralization and pay-to-play mechanisms have sparked heated debate, raising concerns about credibility. In the cryptocurrency space, transparency and genuine decentralization are paramount, and any perceived failures in these areas could undermine trust and hinder long-term adoption. The initial market reaction – a sharp drop in the value of the HYPE token – reflects growing investor skepticism.
This scenario highlights the critical need for robust governance in decentralized protocols. It can also catalyze change in the industry, pushing for a greater emphasis on community-based decision-making. The debate could redefine the standards for true decentralization, encouraging future blockchain projects to prioritize open governance models from the outset. Hyperliquid’s ability to effectively address these concerns will be crucial in shaping its future and influencing the broader discourse on decentralized systems.
Increased tensions in the Hyperliquid community and future prospects
These events sparked a lively discussion on social media. Proponents of decentralization warn that a loss of trust in Hyperliquid could impact the platform’s reputation and long-term growth. Meanwhile, others defend the centralized approach as a way to improve efficiency and attract institutional investors.
The decline in TVL and the value of the HYPE token could have far-reaching consequences for Hyperliquid. To reverse the trend, the platform must not only improve its image, but also build a more diversified structure and respond to accusations of centralization. Otherwise, it risks losing its position in the rapidly growing DeFi ecosystem. Hyperliquid’s current situation is a warning sign for the entire DeFi sector. The conflict between centralization and decentralization remains a key challenge that market leaders must face to ensure stable development and investor confidence.
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