{"id":20333,"date":"2025-04-04T03:45:06","date_gmt":"2025-04-04T03:45:06","guid":{"rendered":"https:\/\/nft.runfyers.com\/index.php\/2025\/04\/04\/hyperliquid-deep-dive-understand-hype-and-hlp-model\/"},"modified":"2025-04-04T03:45:06","modified_gmt":"2025-04-04T03:45:06","slug":"hyperliquid-deep-dive-understand-hype-and-hlp-model","status":"publish","type":"post","link":"https:\/\/nft.runfyers.com\/index.php\/2025\/04\/04\/hyperliquid-deep-dive-understand-hype-and-hlp-model\/","title":{"rendered":"Hyperliquid Deep Dive: Understand HYPE and HLP Model"},"content":{"rendered":"<p><\/p>\n<div>\n<p><span style=\"font-weight: 400;\">Hyperliquid is a decentralized derivatives trading platform (DEX derivatives) that has been gaining traction in the DeFi ecosystem thanks to its unique operational model, transparent governance, and deep integration of security and risk management mechanisms.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Hyperliquid_Liquidity_Model_HLP\"\/><strong>Hyperliquid Liquidity Model (HLP)<\/strong><span class=\"ez-toc-section-end\"\/><\/h2>\n<p><span style=\"font-weight: 400;\">Hyperliquidity Provider (HLP) is the shared liquidity vault of Hyperliquid, funded by the community to execute market-making and liquidation strategies on the platform. Anyone can deposit USDC into HLP and earn profits or bear losses proportional to their contribution. HLP serves as the primary trading counterparty for most orders on the platform, similar to how GLP operates on GMX, but with a more active and adaptive approach.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/app.hyperliquid.xyz\/vaults\" data-wpel-link=\"external\" target=\"_blank\" rel=\"nofollow external noopener noreferrer\">HLP<\/a> does not charge any management fees; all profits and losses are fully distributed to depositors, as the vault is entirely community-owned.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In practice, HLP is structured into several sub-vaults, each implementing different strategies. Specifically, there are two vaults focused on market-making (referred to as Vault A and Vault B) and one vault designated for liquidations (the Liquidator vault). Vaults A and B continuously place buy\/sell orders to provide liquidity to the order book, while the Liquidator vault handles positions that are being liquidated.<\/span><\/p>\n<blockquote>\n<p>Learn more: <a href=\"https:\/\/nftevening.com\/what-is-hyperliquid\/\" data-wpel-link=\"internal\" target=\"_blank\" rel=\"noopener\">What is Hyperliquid?<\/a><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">HLP displays the net position aggregated across all three sub-vaults. For example, if Vault A is long 100 million USD worth of ETH, Vault B is long 200 million USD, and Liquidator is short 300 million USD, the overall net position of HLP would be zero since the long and short positions offset one another.<\/span><\/p>\n<div class=\"b-cta-wrapper\">\n<div class=\"b-cta b-cta--stack\">\n<div class=\"b-cta__image\"><a href=\"https:\/\/nftevening.com\/recommends\/hyperliquid\/\" target=\"_blank\" rel=\"noopener noreferrer nofollow\" data-wpel-link=\"internal\"><noscript><\/noscript><img loading=\"lazy\" decoding=\"async\" width=\"225\" height=\"225\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/03\/hyperliquid-logo.png\" class=\"lazyload image-fit wp-post-image\" alt=\"hyperliquid logo\"\/><\/a><\/div>\n<\/div>\n<\/div>\n<h3><strong>HLP Performance<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">Since its launch, HLP has generally remained profitable \u2013 thanks to its market-making strategy and trading fee revenue. By the end of 2024, the HLP vault had reached a total value locked (TVL) of approximately 350 million USDC and had accumulated around 50 million USDC in profit, reflecting a consistently positive APR.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">HLP\u2019s tendency to maintain a net short position throughout the 2023\u20132024 bull market allowed it to deliver steady returns, even as asset prices were trending upward.<\/span><\/p>\n<div id=\"attachment_150235\" style=\"width: 1290px\" class=\"wp-caption alignnone\"><noscript><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-150235\" class=\"wp-image-150235 size-full\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/04\/HLP-performance.png\" alt=\"HLP performance\" width=\"1280\" height=\"904\"\/><\/noscript><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-150235\" class=\"lazyload wp-image-150235 size-full\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/04\/HLP-performance.png\" alt=\"HLP performance\" width=\"1280\" height=\"904\"\/><\/p>\n<p id=\"caption-attachment-150235\" class=\"wp-caption-text\">HLP performance remained profitable since launched \u2013 Source: HyperLiquid<\/p>\n<\/div>\n<p><span style=\"font-weight: 400;\">However, HLP is not without risk. On several occasions, the vault recorded significant losses due to unexpected market volatility.<\/span><\/p>\n<h3><strong>Jelly and a Hard-learned Lesson for Hyperliquid<\/strong><\/h3>\n<p><span style=\"font-weight: 400;\">One of the most notable incidents occurred in late March 2025, involving a short squeeze on the token JELLY. A trader opened a short position worth approximately 8 million USDC on JELLY, then proceeded to buy up the token on decentralized exchanges (DEXs), causing the price to surge dramatically. As a result, the short position was liquidated and fully transferred to the HLP vault.<\/span><\/p>\n<blockquote>\n<p><span style=\"font-weight: 400;\">Read more: <\/span><a href=\"https:\/\/nftevening.com\/recap-price-manipulation-hyperliquid\/\" target=\"_blank\" rel=\"noopener\" data-wpel-link=\"internal\"><span style=\"font-weight: 400;\">Recap of the Price Manipulation in Hyperliquid<\/span><\/a><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">The price of JELLY on DEXs skyrocketed by several hundred percent, pushing HLP into an unrealized loss of over 10 million USD.<\/span><\/p>\n<p>Facing the risk that a 230 million USD vault could lose everything to a small memecoin, the team acted quickly: they delisted JELLY and set a mandatory liquidation price at 0.0095 USD \u2013 exactly the level where the attacker had originally opened the short.<\/p>\n<p><span style=\"font-weight: 400;\">However, this move sparked widespread controversy regarding Hyperliquid\u2019s decentralization and transparency. Many argued that this was effectively a \u201cvalidator bailout\u201d (or <\/span><span style=\"font-weight: 400;\">\u201cvalidator put\u201d)\u2014a\u201d <\/span><span style=\"font-weight: 400;\">situation where the network steps in to cap losses when the vault is hit too hard. This raised concerns that Hyperliquid may be willing to override market mechanisms to protect HLP\u2019s capital, potentially at the expense of other users.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In response, Hyperliquid upgraded its blockchain to include on-chain validator voting for future asset delistings \u2013 a step toward deterring manipulation. Still, questions remain about the platform\u2019s commitment to true decentralization.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Hyperliquids_Risk_Management_Measures\"\/><strong>Hyperliquid\u2019s Risk Management Measures<\/strong><span class=\"ez-toc-section-end\"\/><\/h2>\n<p><span style=\"font-weight: 400;\">Following the JELLY incident, Hyperliquid implemented a series of risk management upgrades to prevent similar scenarios from occurring in the future. One major change involved reducing the portion of HLP capital used for liquidation strategies. The team set this allocation at a fixed, clearly defined amount and also decreased the rebalancing frequency for the Liquidator vault to help limit potential losses during major liquidation events.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, Hyperliquid introduced a mechanism for loss thresholds and Auto-Deleveraging (ADL). This system automatically triggers deleveraging when losses from liquidation strategies exceed a specific threshold. Once the losses hit that limit, the protocol activates ADL, which draws on unrealized profits from other traders within the same asset pair to cover the deficit.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To further enhance stability, the platform also adopted dynamic Open Interest (OI) caps. The platform adjusts these caps based on each asset\u2019s liquidity and market capitalization, enforcing much stricter limits on low-cap tokens. This measure helps prevent a small number of traders from opening oversized positions that could distort market depth and introduce systemic risk.<\/span><\/p>\n<div id=\"attachment_150236\" style=\"width: 985px\" class=\"wp-caption alignnone\"><noscript><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-150236\" class=\"wp-image-150236 size-full\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/04\/OI-in-hyperliquid.png\" alt=\"OI level of HyperLiquid\" width=\"975\" height=\"665\"\/><\/noscript><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-150236\" class=\"lazyload wp-image-150236 size-full\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/04\/OI-in-hyperliquid.png\" alt=\"OI level of HyperLiquid\" width=\"975\" height=\"665\"\/><\/p>\n<p id=\"caption-attachment-150236\" class=\"wp-caption-text\">Source: ASXN<\/p>\n<\/div>\n<p><span style=\"font-weight: 400;\">These recent improvements reflect Hyperliquid\u2019s recognition of the vulnerabilities exposed by the JELLY episode and its commitment to building a more resilient system. HLP shares profits with users but needs strong risk controls during volatile market conditions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One recent example that highlights Hyperliquid\u2019s evolving governance and risk management practices is the delisting of MYRO perpetuals. On March 29, 2025, validators 2-5 voted to delist MYRO due to low liquidity and manipulation risks.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">ASXN backed delisting due to low volume, poor liquidity, and thin order books across CEXs, DEXs, and Hyperliquid. These conditions made MYRO highly susceptible to price manipulation and posed unnecessary risk to HLP<\/span><\/p>\n<div class=\"b-cta-wrapper\">\n<div class=\"b-cta b-cta--stack\">\n<div class=\"b-cta__image\"><a href=\"https:\/\/nftevening.com\/recommends\/hyperliquid\/\" target=\"_blank\" rel=\"noopener noreferrer nofollow\" data-wpel-link=\"internal\"><noscript><img loading=\"lazy\" decoding=\"async\" width=\"225\" height=\"225\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/03\/hyperliquid-logo.png\" class=\"image-fit wp-post-image\" alt=\"hyperliquid logo\"\/><\/noscript><img loading=\"lazy\" decoding=\"async\" width=\"225\" height=\"225\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/03\/hyperliquid-logo.png\" class=\"lazyload image-fit wp-post-image\" alt=\"hyperliquid logo\"\/><\/a><\/div>\n<\/div>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"Exchanges_Supporting_HYPE_and_Liquidity\"\/><strong>Exchanges Supporting HYPE and Liquidity<\/strong><span class=\"ez-toc-section-end\"\/><\/h2>\n<p><span style=\"font-weight: 400;\">Following its token launch, Hyperliquid quickly drew significant attention from the crypto community. HYPE jumped 60% in half a day, hitting 6 USD and nearing 2B USD in market cap.<\/span><\/p>\n<div id=\"attachment_150237\" style=\"width: 1662px\" class=\"wp-caption alignnone\"><noscript><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-150237\" class=\"wp-image-150237 size-full\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/04\/price-of-hype.png\" alt=\"Exchanges Supporting HYPE and Liquidity\" width=\"1652\" height=\"998\"\/><\/noscript><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-150237\" class=\"lazyload wp-image-150237 size-full\" src=\"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/04\/price-of-hype.png\" alt=\"Exchanges Supporting HYPE and Liquidity\" width=\"1652\" height=\"998\"\/><\/p>\n<p id=\"caption-attachment-150237\" class=\"wp-caption-text\">Source: CoinGecko<\/p>\n<\/div>\n<p>Users swapped USDC for HYPE directly on Hyperliquid DEX after connecting their wallet.<\/p>\n<p><span style=\"font-weight: 400;\">In the weeks following the airdrop, several mid-tier centralized exchanges began listing HYPE, further expanding its liquidity. KuCoin was the first CEX to enable HYPE deposits, withdrawals, and trading (starting December 7, 2024). Today, exchanges such as KuCoin, Gate.io, Bitget, LBank, and CoinW account for the highest trading volumes of HYPE.<\/span><\/p>\n<blockquote>\n<p><span style=\"font-weight: 400;\">Learn more: <\/span><a href=\"https:\/\/nftevening.com\/hyperliquid-not-list-binance\/\" data-wpel-link=\"internal\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Why Hyperliquid Doesn\u2019t Need to List on Binance<\/span><\/a><\/p>\n<\/blockquote>\n<p><span style=\"font-weight: 400;\">Despite no Binance listing, HYPE trades actively, driven by strong community interest after the major airdrop. In its early days, HYPE saw strong volatility from profit-taking and fallout after the JELLY incident. However, in recent weeks, the price has shown signs of stabilization.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Conclusion\"\/><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"\/><\/h2>\n<p>Hyperliquid gains traction in DeFi with community-backed liquidity and strong, proactive risk controls. HLP vaults generate yield, but the JELLY incident exposed tough trade-offs between user safety and decentralization.<\/p>\n<p>The Layer 1 Perpetual DEX\u2019s swift upgrades and HYPE\u2019s strong debut show rising trust in the protocol\u2019s long-term potential.<\/p>\n<blockquote>\n<p><span style=\"font-weight: 400;\">Read more: <\/span><a href=\"https:\/\/nftevening.com\/hyperliquid-airdrop-season-2-guide\/\" data-wpel-link=\"internal\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Hyperliquid Airdrop Season 2 Guide<\/span><\/a><\/p>\n<\/blockquote>\n<\/div>\n<p><a href=\"https:\/\/nftevening.com\/hyperliquid-deep-dive\/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=hyperliquid-deep-dive\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Hyperliquid is a decentralized derivatives trading platform (DEX derivatives) that has been gaining traction in the DeFi ecosystem thanks to its unique operational model, transparent governance, and deep integration of security and risk management mechanisms. Hyperliquid Liquidity Model (HLP) Hyperliquidity Provider (HLP) is the shared liquidity vault of Hyperliquid, funded by the community to execute [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":20334,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true},"categories":[9],"tags":[21],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/nftevening.com\/wp-content\/uploads\/2025\/04\/deep-dive-hyperliquid.jpg","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts\/20333"}],"collection":[{"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/comments?post=20333"}],"version-history":[{"count":0,"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts\/20333\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/media\/20334"}],"wp:attachment":[{"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/media?parent=20333"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/categories?post=20333"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nft.runfyers.com\/index.php\/wp-json\/wp\/v2\/tags?post=20333"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}