Hyperliquid’s Stablecoin War Ignites ’Backroom Deal’ Firestorm – What’s Really Happening?

Whispers of shadowy agreements rock the Hyperliquid ecosystem as stablecoin dominance becomes the new battleground.

The Allegations Surface

Insiders claim backchannel negotiations are skewing the playing field—raising eyebrows across DeFi circles. Protocol parameters shifting overnight, liquidity pools mysteriously rebalanced, and sudden governance proposals that benefit select players.

Follow the Money

When stablecoin yields spike anomalously and trading volumes concentrate in specific pairs, traders start asking uncomfortable questions. The usual 'code is law' mantra gets drowned out by rumors of old-school handshake deals.

Regulatory Déjà Vu

Traditional finance veterans can't help but smirk—apparently some habits die hard, even in supposedly decentralized systems. Because nothing says 'innovation' like recycling Wall Street's playbook with fancier terminology.

Key Takeaways

The Hyperliquid’s USDH race is now down to Native Markets and Paxos. Who will win the deal by the 14th of September?

Hyperliquid’s [HYPE] proposed stablecoin, USDH, has triggered one of the most aggressive bidding wars in the crypto sector. 

Top issuers like Ethena [ENA], Paxos, Sky [SKY] (formerly Maker), Frax, and others are all out fighting to be the official partner. 

But the top contender in the race, Native Markets, is a new player with no experience, which Dragonfly claims has been ‘fixed’ to win.

Slamming the process as a ‘farce,’ Dragonfly VC managing partner Haseeb Qureshi alleged that it was rigged in favor of Native Markets. 

“Hearing from multiple bidders that none of the validators are interested in considering anyone besides Native Markets. It’s not even a serious discussion, as though there was a backroom deal already done.”

Source: X

He cited Polymarket odds, bidders, and Native Markets’ immediate proposal after Hyperliquid floated the request, suggesting the team had prior knowledge before the announcement was made public.  

Tight race between Paxos and Native Markets 

At the time of writing, however, the contest has narrowed to Paxos and Native Markets. 

The chances of Paxos winning the bid surged to 47% after the revised proposal, but dropped a few hours later. Still, the market was pricing Native Markets for a likely win at nearly 60%.

Source: Polymarket

Most of the potential issuers are pledging 95%-100% HYPE value accrual, alongside support by regulated entities like BlackRock. 

Source: AMBCrypto

All proposals from potential issuers should be finalized by the 10th of September. On the 11th of September, Hyperliquid validators should state their preferred potential issuer. 

The final vote by validators will be done on the 14th of September to allow stakers to align with the validators that mirror their choice. 

But what does Hyperliquid want to achieve with the USDH? And why now? 

Currently, Circle’s USDC dominates the decentralized exchange (DEX) and the chain, with $5.5 billion worth of USDC.

However, the yield gained ($100M) is not shared with Hyperliquid but with rival Coinbase (as per its agreement with Circle).  

Source: Reciprocal Ventures

Apart from ecosystem growth, the stablecoin should help handle regulatory risks. Especially on the on/off ramp side, according to James Evans, investment analyst at Reciprocal Ventures. 

“That risk could materialize as an attack on Hyperliquid’s on/off ramps. So in addition to being a product decision, having a compliant stablecoin could be a first step to building regulatory legitimacy.”

Some, like Arthur Hayes, have backed Ethena for the USDH bid. But others have pointed out that Paxos and Ethena have existing stablecoin products that WOULD lead to conflicting interests. 

Amid the bidding wars for USDH, HYPE holders have come out as the main beneficiary. The altcoin printed a new high of $55, up about 20% since the bidding began over the weekend. 

Source: HYPE/USDT, TradingView