Hyperliquid's Buyback Boosts Token Price, While Ethereum's Fee Burn Falls Flat

Introduction

Hyperliquid has spent $1.26 billion buying back its HYPE token, while Ethereum's fee burn approach has resulted in a 51% drawdown. Despite Ethereum's larger market cap, Hyperliquid's buyback model appears to have supported its price more effectively, with HYPE currently 18.5% below its record price, while ETH is 50.7% below its peak.

Background

Hyperliquid uses fees collected from trades on its exchange to buy back its own token, spending over $1.26 billion on buybacks to date. In contrast, Ethereum follows a different approach by permanently removing a portion of every transaction fee from circulation through a burn process.

Comparison

Both strategies aim to decrease the number of tokens available, but buybacks not only remove tokens from circulation but also create buy orders in the market. On the other hand, a burn quietly reduces supply without generating new demand. Since 2024, Ethereum's burn rate has been lower than the new ETH distributed to validators, resulting in a slight increase in ETH's total supply.

Conclusion

Hyperliquid's buyback model appears to have supported its price more effectively, with HYPE currently 18.5% below its record price, while ETH is 50.7% below its peak. However, these two tokens differ in size and maturity, and comparing drawdowns may offer only indirect insight into each strategy's effectiveness.