The recent crackdown on cryptocurrency by the Democratic Party, led by the outspoken Senator Elizabeth Warren, has raised alarms over the future of decentralized exchange (DEX) Hyperliquid (HYPE). This increased scrutiny is rooted in allegations concerning crypto ventures tied to President Donald Trump’s family, notably World Liberty Financial (WLFI).
National security concerns have emerged, particularly regarding WLFI’s operations. In a letter sent to Attorney General Pamela Bondi and Treasury Secretary Scott Bessent, Senators Warren and Jack Reed expressed their fears that WLFI may pose significant national security risks.
The letter cited worries that WLFI lacks adequate safeguards against the manipulation of funds or potential influence from malicious actors. Supporting their claims, the senators drew on a report from watchdog group Accountable.US, which pointed to WLFI’s sales to what they described as “highly suspicious entities.”
On-chain investigator ZachXBT has highlighted the impressive $550 million raised during WLFI’s token sale, despite accusations that about $10,000 came from illicit sources. This amount represents a tiny fraction—merely 0.0018%—of the total raised, shedding doubt on the validity of the allegations.
As concerns about the misuse of “weak illicit funds” by US regulators against the broader crypto industry grow, ZachXBT hinted that should action against WLFI succeed, Hyperliquid could find itself under similar scrutiny next.
Although ZachXBT did not outline specific reasons why Hyperliquid might be targeted, speculation hinges on WLFI’s native tokens being traded on the Hyperliquid platform. Moreover, Hyperliquid recently suffered a staggering loss of $4.9 million due to external manipulation of the POPCAT token, where attackers inflated the token’s price using $3 million in USDC stablecoin. Such incidents could further complicate the exchange’s standing with regulators.
Despite these mounting challenges, Hyperliquid has rolled out an ambitious initiative dubbed ‘growth mode’ as part of its HIP-3 upgrade. This feature dramatically decreases trading fees for newly launched markets by over 90%, aiming to boost liquidity and attract market makers interested in emerging perpetual contracts.
Since its inception, Hyperliquid’s token, HYPE, has seen impressive growth, soaring by 1,000% to position the DEX as the 18th largest cryptocurrency globally, with a market capitalization of $10 billion.
Currently, HYPE trades at $37.31, reflecting a decline of over 9% in the past two weeks alone. After peaking at $59.30 earlier this year, the token has retraced nearly 37%, mirroring the overall correction seen across the crypto market.
