Hyperliquid, a blockchain-based perpetual trading platform, has announced changes to its margin policy after its HLP liquidity fund suffered a $4 million loss from a major liquidation on March 12. Starting March 15, the platform will require a minimum margin of 20% for certain open positions to reduce systemic risks and protect liquidity stability during extreme market fluctuations.
Major Liquidation Forces Hyperliquid to Strengthen Risk Management
A major liquidation resulted in a $4 million loss for Hyperliquid’s HLP liquidity fund, prompting the platform to quickly adjust its risk management policies. While this was not a hack or technical failure, the incident raised concerns about the security of the liquidity fund when handling large-scale trades.
In response, Hyperliquid announced several key changes, including higher margin requirements for certain open positions. This move aims to reduce systemic risk and protect the liquidity fund from significant losses during periods of extreme market volatility.
Learn more: What is Hyperliquid?
Hyperliquid Raises Margin Requirements After $4M Liquidation Loss
On March 15, Hyperliquid will raise the minimum margin requirement to 20% for certain positions to reduce systemic risk. The move follows a $4 million loss in its HLP liquidity fund caused by large liquidations. Traders who withdrew collateral before liquidation shifted losses onto the fund, straining its stability. By tightening margin rules, Hyperliquid aims to strengthen liquidity and create a more secure trading environment.
To date, Hyperliquid has processed over $1 trillion in trading volume and become the first DEX to rival CEX scale. As volume and open interest continue to grow, there are increasingly large tests for the margining system. Yesterday’s event highlighted an opportunity to strengthen…
— Hyperliquid (@HyperliquidX) March 13, 2025
Despite stricter margin requirements, traders can still use up to 40x leverage on new positions. Hyperliquid aims to balance risk management with its appeal to high-leverage traders, refining its policies to maintain market participation without compromising financial stability.
The $200 Million Liquidation – A Wake-Up Call for Hyperliquid’s Risk Management
On March 12, a trader executed a unique strategy to liquidate a long ETH position worth approximately $200 million on Hyperliquid. By withdrawing nearly all of their collateral before the position was liquidated, they managed to avoid slippage and exit the trade without incurring significant losses.
However, this strategy shifted the financial burden onto Hyperliquid’s liquidity pool (HLP), which had to absorb the liquidated position, resulting in a $4 million loss. While not a system exploit or technical failure, the event highlighted vulnerabilities in the platform’s risk management framework.
In response, Hyperliquid has tightened its margin requirements, increasing the minimum margin to 20% for certain open positions. This adjustment aims to enhance liquidity protection and mitigate the risk of similar losses in the future. However, stricter margin rules may also make the platform less appealing to high-leverage traders, raising questions about its long-term competitiveness.
Whether these measures will help Hyperliquid maintain its market dominance remains to be seen, but the incident underscores the need for continuous improvements in risk management.
Learn more: Hyperliquid Incurs a $4 Million Loss From A Single Liquidation
About Hyperliquid
Hyperliquid HYPE is a perpetual futures trading platform that offers fast execution and low fees, similar to centralized exchanges, while maintaining the decentralized features of Web3. This unique combination has enabled Hyperliquid to attract a growing number of traders and establish itself as a leading player in the market.
A VanEck report shows Hyperliquid holds 70% of the perpetual futures market, surpassing GMX and dYdX. DefiLlama data also reports $340M in TVL and $180M in daily trading volume, highlighting its strong liquidity and market dominance.
