Arthur Hayes: Why Most Crypto Tokens Are Built to Fail and How Hyperliquid is Different

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Arthur Hayes Explains Why Most Crypto Tokens Are Built to Fail

Key Takeaways:

  • Most tokens fail because protocol revenue never reaches token holders.
  • VC-backed projects create forced selling pressure from day one of listing.
  • Hyperliquid returns 97% of revenues to buy back its own token.
  • Crypto investors have matured – cash flows to token holders now matter.

Arthur Hayes has observed a recurring trend in the crypto world. He’s noticed that many projects successfully raise funds and launch their tokens, only to see the price fall below the initial offering price within a few months. While most blame general market factors, timing, or negative feelings, Hayes believes there’s a more precise reason for this happening.

He points out that the economic benefits generated by the system aren’t being shared with those who hold the tokens.

Many crypto projects fail because while the project itself might generate revenue through things like trading fees and lending, that money doesn’t go to the people who actually *own* the token. Instead, the token mainly serves as a way for the initial investors and the project team to cash out. It’s important to remember these early investors aren’t necessarily acting maliciously – they have a responsibility to their own investors and will sell their tokens when they’re allowed to.

In his words:

When you list your TGE, that’s the maximum price your token is ever going to receive.

When a new token is first launched, it usually generates a lot of excitement but doesn’t have much selling. However, as time goes on, more tokens are released to early investors and the team. There’s nothing in place to encourage buying or support the price, like buying back tokens or sharing profits, so the price is likely to fall. The way this token is designed prioritizes profiting from the initial launch rather than benefiting those who hold it long-term.

He advises many projects and consistently suggests a strategy of unlocking tokens and returning value to token holders to better align everyone’s interests. However, this advice is almost always ignored. Venture capitalists who have invested in these projects prefer the traditional model where tokens vest and are distributed according to a set schedule. They’re used to keeping revenue within the company’s treasury rather than sharing it with token holders.

He firmly stated they couldn’t proceed, and then, with a dismissive tone, wished them luck while predicting their investment would become worthless.

Companies that followed the traditional startup path – securing funding from well-known venture capital firms and then going public with a large number of unsold shares – predictably saw their stock prices fall. The outcome aligned perfectly with this established pattern: a decline in value.

Why Hyperliquid is different

Hyperliquid took a unique approach from the beginning. They avoided a large venture capital investment and didn’t allow institutional investors to control a significant portion of the market. The team retained enough tokens to compensate themselves for their work, but committed an impressive 97% of the protocol’s revenue to purchasing HYPE tokens directly from the market.

As a researcher, I’ve found it’s important to clarify that the fund isn’t a pledge, but rather a self-sustaining system. The Assistance Fund operates automatically, fueled by the trading fees generated on Hyperliquid. And, as one industry expert noted, those fees are a major driver of the exchange’s success. Crucially, the buyback program isn’t something we decide on – it continues as long as the exchange itself is operational.

Instead of investors rushing to sell, this protocol actually buys back its own token using revenue generated from its operations. This drives the price up not through hype, but because the amount of tokens available is decreasing as money is used to purchase them.

Teams often don’t follow this approach, not because it’s ineffective, but because their initial funding decisions prevent them from doing so. The way they structured their fundraising essentially forced them into a specific model before their project even began.

Arthur Hayes: Most Tokens Fall Because Projects Pocket Protocol Revenue

I was listening to the What Bitcoin Did podcast the other day, and Arthur Hayes from BitMEX made a really interesting point. He basically said that a lot of crypto projects aren’t effectively getting the value they create back to their token holders. It’s like they’re building something great technically, but not translating that into actual returns for people who invested in the tokens.

— Wu Blockchain (@WuBlockchain) May 27, 2026

What this means for crypto investors

Hayes traces the evolution of fundraising in crypto, starting with Initial Coin Offerings (ICOs) in 2017, followed by Initial Exchange Offerings (IEOs), Initial DEX Offerings (IDOs), and now, the current venture capital-backed Token Generation Events (TGEs). Despite each new approach promising a more equitable system, the results have consistently been the same. For almost ten years, investors have been figuring out what doesn’t work in this space.

He feels crypto investors have become more sophisticated and are now focused on receiving actual returns on their investments, regardless of how those returns are distributed.

The biggest change in the investment landscape is a growing sense of maturity. Previously, having a well-known venture capital firm involved, a professional report, or even a large initial funding round was often enough to generate excitement. Now, none of that guarantees success. Investors are focused on a more fundamental question: will owning this token actually generate income? Not through speculation and resale, but through the project itself creating and distributing value.

Hyperliquid answered that question clearly. Most of the market still hasn’t.

This article is for informational purposes only and shouldn’t be considered financial, investment, or trading advice. Coindoo.com doesn’t support or suggest any particular investment or cryptocurrency. Before making any investment choices, be sure to do your own research and talk to a qualified financial advisor.

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2026-05-28 14:37