Hyperliquid At Risk In Democrats’ Crypto Crackdown? ZachXBT Warns Of Potential Risks

The recent crypto crackdown from the Democratic party, spearheaded by crypto-skeptic Senator Elizabeth Warren, may cast a shadow over the future of the decentralized exchange (DEX) Hyperliquid (HYPE). 

This heightened scrutiny stems from concerns surrounding the crypto ventures associated with President Donald Trump’s family, specifically focusing on World Liberty Financial (WLFI).

National Security Concerns Over WLFI’s Sales

In a letter dated Tuesday, US Senators Warren and Jack Reed, who serve on the Senate Committee on Banking, Housing, and Urban Affairs, expressed apprehensions that WLFI might pose national security risks. 

The letter, which was exclusively obtained by CNBC and addressed to Attorney General Pamela Bondi and Treasury Secretary Scott Bessent, outlined the senators’ belief that World Liberty Financial lacks sufficient safeguards to prevent malicious actors from manipulating funds or exerting influence over its governance.

The senators referenced a report by the nonprofit watchdog Accountable.US, which indicated that WLFI had sold its WLFI tokens to “various highly suspicious entities.” 

On-chain sleuth ZachXBT brought attention to the fact that WLFI raised an impressive $550 million during its token sale, but the senators accused it of having raised around $10,000 from illicit sources. 

ZachXBT noted that this figure represents merely 0.0018% of the total World Liberty Financial token sale, highlighting the disproportionate nature of the allegations.

The investigator expressed concern over the potential misuse of “weak illicit funds” arguments by US regulators against the crypto industry. He suggested that if the actions against WLFI prove successful, Hyperliquid could become a target next. 

While ZachXBT did not provide specific reasons for why Hyperliquid might be affected, speculation surrounds WLFI’s native token trading on the Hyperliquid platform. 

Moreover, Hyperliquid recently incurred a loss of $4.9 million due to the external manipulation of the POPCAT token, where attackers artificially inflated the token’s price using $3 million in Circle’s USDC stablecoin, which could also catch the Senator’s attention if any action against the exchange materializes. 

Hyperliquid Unveils ‘Growth Mode

Despite the challenges, Hyperliquid introduced a new feature under its HIP-3 upgrade framework, aimed at significantly reducing trading fees for newly launched markets. 

Dubbed “growth mode,” this upgrade reduces all-in taker fees by more than 90%, a move designed to accelerate liquidity formation and incentivize market makers engaging in nascent perpetual contracts.

Since its launch, Hyperliquid’s native token, HYPE, has experienced notable growth, skyrocketing by 1,000%. This surge has elevated Hyperliquid to rank as the 18th largest cryptocurrency in the world, boasting a market capitalization of $10 billion.

However, when writing, HYPE trades at $37.31, recording losses of over 9% in the past fourteen days. After reaching a record high of $59.30 earlier this year, the token has retraced by almost 37%, in line with the broader crypto market’s correction. 

Featured image from DALL-E, chart from TradingView.com