Hyperliquid reported a $4 million loss in liquidity provider (HLP) safe within 24 hours.
According to a March 12 post on X, the loss followed a major liquidation event involving high-risk traders.
Following the news, Hyperliquid's hype tokens reacted negatively to the event, down more than 3% in the last 24 hours. The token reached a low of $12.80 before rebounding slightly at press time to $13.90.
High lipids are the largest decentralized permanent exchange by trading volumes, managing more than 64% of the market.
what happened?
The protocol said that traders are holding a long position of large Ethereum (ETH) using wallet address 0xF3F4.
On-chain analyst Embercn reported that the whale has opened a leveraged long position of 50 times the 175,000 ETH, worth about $340 million.
However, the traders later closed some of their positions and retracted $17.09 million. The move reduced the margin for the remaining 160,000 ETH long positions, leading to a massive liquidation.
Hyperliquid confirmed the development, but noted that traders were still able to close out profits of around $1.8 million. However, the event had a negative impact on HLP, resulting in a loss of $4 million during the reporting period.
Hyperliquid emphasized that HLP is not a risk-free strategy, but Vault maintains historic net profits of around $60 million.
The HLP serves as a community-driven liquidity vault within the Hyperliquid ecosystem. Supports market production and liquidation strategies, allowing users to bet USDC in exchange for shares of profit or losses on the platform.
This model brings system-level trading strategies to retail users, generating revenue through trading fees, financing rates and liquidation. At the time of reporting, Vault has recorded a negative annual revenue of 34%.
Following the event, Hyperliquid said:
“The maximum leverage is updated to 40x and 25x for BTC and ETH respectively, increasing the maintenance margin requirements for larger positions. This provides a better buffer for backstop clearing of larger positions.”
