Token surges as buyback frenzy eclipses exchange-traded fund investments, sparking significant price gains.

In a remarkable turn of events, the value of Hyperliquid's HYPE token skyrocketed to an unprecedented high of over $62 on May 21, 2026. According to Zennon Kapron, a contributing writer for Forbes, the primary catalyst behind this surge is not the launch of spot ETFs, but rather the protocol's unique buyback mechanism. Although the introduction of these ETFs, such as the one launched by Bitwise in May, has contributed to the token's growth, their impact is relatively modest compared to the buyback mechanism. Since its inception, Hyperliquid has channeled a staggering $1.16 billion in trading fees into the purchase of HYPE tokens on the open market. This distinctive approach has significant implications for investors seeking to understand the current market trends.

The Hyperliquid protocol is designed to allocate approximately 99% of its perpetual and spot trading fees to a dedicated fund, known as the Assistance Fund. This fund is responsible for buying back HYPE tokens on the open market, block by block, without being subject to governance votes or board decisions. As a result, the buying process is directly tied to the protocol's revenue model, making it a key driver of the token's price. The scale of these purchases far surpasses the inflows from ETFs, cementing the Assistance Fund's position as a dominant force in the market.

Kapron argues that the recent rally in HYPE's value is largely driven by the buyback mechanism, rather than expectations surrounding ETF launches. In fact, the Assistance Fund's activity has been substantial, with $316.76 million deployed in buybacks during the third quarter of 2025 alone. This mechanism has created a robust support structure for the token, with multiple streams of capital flowing towards it. For instance, Hyperliquid Strategies, a Nasdaq-traded entity, holds approximately 20 million HYPE tokens and reported a net profit of $152.5 million in the last quarter, primarily due to unrealized gains on its holdings. Additionally, up to 90% of the reserve yield earned on USDC held across the platform is directed towards buybacks and ecosystem incentives.

However, this support structure is heavily reliant on sustained trading volume. Despite record token prices, quarterly buyback figures have begun to decline, with the fund spending $316.76 million in Q3 2025, $255.05 million in Q4 2025, and $192.25 million in Q1 2026, representing a roughly 40% drop over two quarters. This downward trend in buyback activity has occurred concurrently with HYPE's continued price growth, creating a disconnect between the token's price and the buyback engine. Kapron warns that this disparity could become critical during a broader market downturn, as the buyback mechanism that amplifies gains during an upswing may withdraw support during a decline.

The token's unlock schedule is another factor that could exert pressure on the market. As locked HYPE tokens enter circulation, the fund will need to absorb increasing selling pressure to maintain price stability. The combination of a rising float and declining volume could exacerbate this issue, making it essential for investors to carefully consider their position. In Kapron's words, buying HYPE at record highs is essentially a leveraged bet on the continued growth of perpetual futures volume on a single exchange, a narrow and potentially risky proposition.