Hyperliquid, a blockchain network specializing in trading, has increased margin requirements for traders after its liquidity pool lost millions of dollars during a massive Ether (ETH) liquidation, the network said. 

On March 12, a trader intentionally liquidated a roughly $200 million Ether long position, causing Hyperliquid’s liquidity pool, HLP, to lose $4 million, unwinding the trade. 

Starting March 15, Hyperliquid will begin requiring traders to maintain a collateral margin of at least 20% on certain open positions to “reduce the systemic impact of large positions with hypothetical market impact upon closing,” Hyperliquid said in a March 13 X post. 

The incident highlights the growing pains confronting Hyperliquid, which has emerged as Web3’s most popular platform for leveraged perpetual trading. 

Hyperliquid has adjusted margin requirements for traders. Source: Hyperliquid

Hyperliquid said the $4 million loss was not from an exploit but rather a predictable consequence of the mechanics of its trading platform under extreme conditions. 

“[Y]esterday’s event highlighted an opportunity to strengthen the margining framework to address extreme conditions more robustly,” Hyperliquid said. 

These changes only apply in certain circumstances, such as when traders are withdrawing collateral from open positions, Hyperliquid said. 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 (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 — or losses from selling a large position all at once. 

Instead, those losses were borne by Hyperliquid’s HLP liquidity pool. 

Hyperliquid’s HLP has more than $350 million in TVL. Source: DeFiLlama

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Leading perps exchange

As of March 13, HLP has a total value locked (TVL) of approximately $340 million sourced from user deposits, according to DefiLlama. 

Launched in 2024, Hyperliquid’s flagship perps exchange has captured 70% of the market share, surpassing rivals such as GMX and dYdX, according to a January report by asset manager VanEck. 

Hyperliquid touts a trading experience comparable to a centralized exchange, featuring fast settlement times and low fees, but is less decentralized than other exchanges.

As of March 12, Hyperliquid has clocked approximately $180 million per day in transaction volume, according to DefiLlama. 

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