Hyperliquid’s [HYPE] deflationary model is gathering pace despite HYPE extending its two-day correction.
According to the recent reports, the protocol burned $1.28 million worth of HYPE over the past 24 hours after generating $1.65 million in fees.
Lifetime token burns have now reached 47.53 million HYPE, equivalent to $2.68 billion, highlighting stronger long-term holding and fewer tokens changing hands.
The combination points to a steadily tightening supply backdrop , which could in turn translate into bullish signals in the long run.
Has the burn rate affected the network supply?
The impact on the burned tokens is already visible on the market. According to the recent data, Hyperliquid’s circulating turnover has fallen to a weekly average of 2.9%.
The latest burn is turning out to be revenue-driven, meaning higher protocol activity continues removing HYPE from circulation.
At the same time, the sharp decline in circulating turnover suggests holders are keeping their positions instead of rotating supply back into the market.
Reduced token availability has historically supported bullish trends when demand remains stable. The same turn of events could be developing for HYPE. Moreover, given that the derivatives and supply metrics remain supportive despite the recent price weakness.
On contrary, the token trading volume have flattened at around $230 million after a week of steady gains. This could be the result of many traders playing averse as they wait for a potential rejection at around $54 before they chip in to join the trend.
Can bulls reverse the correction?
On the daily chart, the token’s bollinger bands have widened indicating the current increased market volatility.
However, the token is still trading below the key 20 SMA and its Stochastic RSI is currently at an overbought region at $86.21, increasing the likelihood of further short-term bearish run.
Since retesting the 20 SMA at around $56.65 yesterday, the token has recorded consecutive days of bearish run.
However, with the overall long-term structure still leaning bullish and the token supply reducing, the token could be on a short correction to clear the liquidity cluster worth over $1.53 million at $54.22 before resuming its long-term bullish structure.
Notably, the price level lies within the market gap between $52 and $55 on the daily chart, a zone that the token price action is likely to retest to collect unfilled orders before resuming it long-term bullish trend.
If HYPE bulls defend the demand zone, a continuation of the bullish rally back to $60 will be more than likely to materialize.
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