Hyperliquid Raises Margin Requirements After $4M Loss

Hyperliquid, a blockchain network specializing in trading, has increased margin requirements for traders following a significant liquidation loss. On March 12, a trader intentionally liquidated a roughly $200 million Ether long position, resulting in a $4 million loss for Hyperliquid’s liquidity pool, HLP. This event prompted Hyperliquid to adjust its margin requirements to mitigate the impact of large positions under extreme market conditions.

Starting March 15, Hyperliquid will require traders to maintain a collateral margin of at least 20% on certain open positions. This change is aimed at reducing the systemic impact of large positions with hypothetical market impact upon closing. Hyperliquid clarified that the $4 million loss was not due to an exploit but a predictable consequence of the platform's mechanics under extreme conditions. The incident highlights the challenges faced by Hyperliquid, which has become a popular platform for leveraged perpetual trading in the Web3 space.

These changes apply specifically when traders are withdrawing collateral from open positions. Despite the increased margin requirements, traders can still take on new positions with up to 40 times leverage. Perpetual futures, or “perps,” are leveraged futures contracts with no expiry date. Traders deposit margin collateral, typically USDC for Hyperliquid, to secure open positions. By withdrawing most of his collateral and liquidating his own position, the trader effectively cashed out of his trade without incurring slippage, transferring those losses to Hyperliquid’s HLP liquidity pool.

Hyperliquid’s HLP has a total value locked (TVL) of approximately $340 million sourced from user deposits. Launched in 2024, Hyperliquid’s flagship perps exchange has captured a significant market share, surpassing rivals. The platform offers a trading experience comparable to a centralized exchange, featuring fast settlement times and low fees, but is less decentralized than other exchanges. Hyperliquid’s proactive measures demonstrate its dedication to maintaining a secure and reliable trading environment for its users.