Hyperliquid reported a $4 million loss in its Liquidity Provider vaults within 24 hours following a major liquidation event involving a high-risk trader. The HYPE token dropped over 3% in response. A trader opened a large leveraged long position of 175,000 ETH, leading to significant liquidations. Despite this, the trader still managed to close with a profit of around $1.8 million. Hyperliquid emphasized that the HLP vault is not risk-free, but maintains a historical net profit of approximately $60 million. The vault supports market-making and liquidation strategies, bringing institutional-level trading to retail users. After the event, Hyperliquid announced changes to leverage limits to increase maintenance margin requirements for larger positions.

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