On 26 March 2025, a trader’s short position on a small token called JELLY landed in the books of Hyperliquid’s community vault, and the vault’s paper loss reached 13.5 million dollars. The same day the chain’s validators voted to delist the market and close it at $0.0095, CoinDesk reported, while oracles were showing about 50 cents. Anyone learning how to use Hyperliquid should keep that day in mind: this is a fast exchange you reach with your own wallet, and a small group of validators can still change the outcome of a trade.
The clicks come first, in numbered steps: wallet or email, the 5 USDC deposit floor, the testnet faucet and its catch, a first order, leverage, withdrawal. After them come what each trade costs, who runs the chain and what can go wrong. All live figures were read on 30 October 2026. The steps follow Hyperliquid’s documentation and its public app as seen without a connected wallet: we did not deposit or place an order for this lesson, so the labels on your screen may differ.
The previous lesson, how on-chain perpetuals and derivatives work, compared the models and explained funding. One reminder: a perpetual future is a contract with no expiry, held on margin, kept near the spot price by periodic payments between longs and shorts. If a position’s collateral runs out, it gets closed by force, a process covered in depth in our lesson on liquidations. Nothing below is a recommendation to trade. Leverage is the fastest way to lose a deposit.
What you are connecting to: an order book on its own chain
Hyperliquid is a layer 1 blockchain built around one application, a central limit order book for perpetuals and spot. Its state has two parts, according to the official documentation: HyperCore, which holds margin and the matching engine, and HyperEVM, a general smart contract environment. The consensus is HyperBFT, a variant of HotStuff, and the docs give a median latency of 0.2 seconds for a co-located client and about 200,000 orders per second on mainnet. Blocks are produced by validators in proportion to staked HYPE.
With an ordinary wallet you keep your keys and sign orders yourself. Trading itself costs no gas; only the deposit on the source chain does. And the official app has no account form, which does not mean the service is open to everyone, as the next section shows.
| Hyperliquid activity, DefiLlama, read 30 October 2026 | Figure |
|---|---|
| Open interest, Hyperliquid perps (latest daily reading) | $7.71 billion |
| Fees, last 30 days | $80.9 million |
| Liquidations, last 7 days | $548 million |
| Liquidations, last 30 days | $1.99 billion |
| Total value locked, Hyperliquid L1 | $2.69 billion |
Look at the liquidation rows: roughly two billion dollars of positions closed by force in a month, on one venue. DefiLlama’s latest daily bucket may be a partial day, so read these as orders of magnitude.
Before you click: who may use it and what you need
Access is the first question, and the answer depends on where you live. The text that counts is Hyperliquid’s terms of use, last updated on 15 June 2026. Read them yourself before connecting: what follows is our summary, not legal advice. They come from Hyperliquid Corp., which provides the app and says it does not operate the chain. Section 1.3 states that neither the app nor Hyperliquid is licensed or registered by any regulator in any jurisdiction, and section 2.3 says you have no recourse against the company for your losses.
- United States: section 1.6 of the terms bars people and companies that reside in, are located in or are incorporated in the US or Ontario, along with those in sanctioned territories and citizens of those territories. Third-party guides add that the app blocks US IP addresses, which we did not test. Section 3.1.5 forbids using VPNs or proxies to hide your location, and this guide offers no way around the rule. The regulated route is elsewhere: on 29 May 2026 the CFTC approved Kalshi to list a bitcoin perpetual and gave Coinbase’s US arm a no-action letter for perpetual products routed through Bermuda.
- United Kingdom: the FCA banned the sale, marketing and distribution of crypto derivatives to retail consumers. Its press release says: “The ban will come into effect on 6 January 2021.” The rule binds firms rather than readers, but a UK retail reader should take this guide as an explanation, not as a route to opening leveraged positions.
- European Union: on 24 February 2026 ESMA said derivatives marketed as perpetual futures are likely to fall within national CFD measures, which bring leverage limits, a margin close-out and negative balance protection. The statement addresses firms. Hyperliquid’s terms claim no licence anywhere, so no MiCA authorisation either, and section 1.9 leaves you to check that your use is lawful where you live, naming leveraged and derivative trading. We found no AMF or Consob page on Hyperliquid or on-chain perps. That is no all-clear: check their warning lists yourself.
Then the kit. You need an EVM wallet (the docs name Rabby and MetaMask, among others), or an email address. You need USDC, and if you use a wallet, a little ETH on Arbitrum for gas. Use a separate wallet that holds only what you are ready to lose, and keep the recovery phrase offline, as our guide on seed phrase security explains. Type the address yourself: the official app is app.hyperliquid.xyz, and look-alike sites exist for every large venue.
How to use Hyperliquid step by step, from empty wallet to first order
The testnet surprises people. The usual advice on how to use Hyperliquid safely is to practise with mock money first, and we give it too, but the faucet only serves addresses that have already deposited on mainnet. So the steps below start with a very small real deposit, then go straight to the testnet before any real order.
Steps 1 to 4: connect and make the smallest possible deposit
- Open app.hyperliquid.xyz and click Connect. With a wallet, choose it and approve the connection. With email, enter your address and type the six-digit code you receive; an embedded wallet is created for you.
- If you connected a wallet, click Enable Trading and sign the message. It costs no gas. Read what the wallet shows before signing, as with any request.
- Click Deposit and enter an amount of USDC. The floor is 5 USDC, and it is a hard one: the docs warn that below it a deposit “will not be credited and be lost forever”. With an email account, deposits under 5 USDC are redirected to the email wallet, and those under 1 USDC are lost. Wallet connections take USDC on Arbitrum only; email accounts can receive it on Arbitrum, Ethereum, Base or Polygon.
- Confirm in your wallet. The gas is paid in ETH on Arbitrum, and the wallet shows the amount before you sign. At 10:00 UTC on 30 October 2026 Arbitrum’s gas price was about 0.02 gwei, which puts a token transfer of 100,000 to 150,000 gas under one cent (own estimate, ETH near $2,224). Your wallet’s figure is the one to trust. The docs say the bridge route credits the deposit in under a minute.
An example of scale, not a suggestion: 20 USDC. Remember that the API documentation mentions a 1 dollar withdrawal fee, so a 5 USDC minimum deposit loses a fifth of its value on the way out.
What happens behind that button has changed. The route most guides call “the Arbitrum bridge” is now described by Hyperliquid itself as the legacy bridge, deprecated in favour of Circle’s CCTP, under which USDC is minted natively on the Hyperliquid L1. The docs add that the legacy bridge holds less than 10% of the USDC supply on HyperCore. They do not say which plumbing the app’s Deposit button uses, so we will not either. For the general trade-offs of moving assets between chains, see our lesson on cross-chain liquidity and bridges. BTC, ETH, SOL and other assets can also be sent to a deposit address, then sold for a quote asset, a route run by the independent team Unit.
Steps 5 to 9: the same screen with mock money
- Go to app.hyperliquid-testnet.xyz/drip with the same address. The faucet gives 1,000 mock USDC, but only to an address that has deposited on mainnet. Email users get different addresses on mainnet and testnet: export the email wallet, import it into an extension such as Rabby or MetaMask, then connect that.
- Pick a perp such as BTC, then find the margin mode and leverage controls near the order form. Choose Isolated and 1x.
- Place a limit buy well below the market price. It should rest in the book and show under the Open Orders tab. Then cancel it. You have just seen the difference between an order and a position.
- Place a small market order and compare the fill with the price you expected, since a testnet book may be thin. A position should appear with an entry price, a margin amount and a liquidation price. Find those three numbers.
- Close the position with a market order, then look in Trade History for the fee charged. Do this a few times, adding a stop order, before real money enters the picture.
The app offers more than market and limit orders. The order types page lists stop and take orders in market and limit forms, Scale, Trailing Stop, Chase and TWAP. Two details matter to a beginner. A stop market is a market order once triggered, so in a fast move it fills wherever the book allows. And triggers follow the mark price, the median of an oracle-based price, Hyperliquid’s own book and other exchanges’ perp prices, which can differ from the last trade you see.
Moving to real money is the same sequence with one difference: mistakes now cost something. Keep the size small enough that a total loss changes nothing for you. If you use leverage at all, the table in the next section shows how quickly the margin for error shrinks.
Leverage settings and the price at which you get liquidated
Cross or isolated margin
Cross margin is the default: one pool of collateral backs all your cross positions, so a loss on one can liquidate the others. Isolated margin ring-fences a position’s collateral. If that position is liquidated, everything else is untouched, and you lose only what you put in it. Some assets are “strict isolated”, meaning margin cannot be removed once added.
A subtle point catches people out. In cross mode, moving the leverage slider does not change your liquidation price, according to the docs: lower leverage only reserves more collateral. In isolated mode it does change it, because leverage sets how much margin the position holds. To make a cross position safer you need more collateral in the account or a smaller position.
Margin rates and a worked liquidation price
Leverage is an integer between 1 and the asset’s maximum. Hyperliquid’s public API, read on 30 October 2026, gives a maximum of 40x for BTC, 25x for ETH and 20x for SOL. Of the 179 validator-operated perps it lists as live, 175 stop at 10x or less, and limits fall for very large positions. The initial margin is position size times mark price divided by leverage. The maintenance margin is half the initial margin at maximum leverage, so from 1.25% for a 40x asset to 16.7% for a 3x asset.
The liquidations page publishes the formula: liquidation price = price − side × margin available ÷ position size ÷ (1 − l × side), where side is 1 for a long and −1 for a short, and l is one divided by the maintenance leverage. The table applies it to an invented case: a 200 USDC isolated long at an example price of $100, on an asset with 20x maximum leverage, so a 2.5% maintenance rate and 5 USDC of maintenance margin at entry. Own calculation, ignoring fees and funding.
| Leverage | Initial margin | Liquidation price (long) | Fall from entry |
|---|---|---|---|
| 1x | 200.00 USDC | $0.00 | 100.0% |
| 2x | 100.00 USDC | $51.28 | 48.7% |
| 3x | 66.67 USDC | $68.38 | 31.6% |
| 5x | 40.00 USDC | $82.05 | 17.9% |
| 10x | 20.00 USDC | $92.31 | 7.7% |
| 20x | 10.00 USDC | $97.44 | 2.6% |
At 1x the long is out of reach of liquidation in this example, but a 1x short is not: the same formula puts it at $195.12. At 5x the long is liquidated 18% below entry, a move crypto assets have made in a day, and the mirror short at $117.07. At 20x, a 2.6% move is enough. Funding, fees and, in cross mode, your other positions all shift the real figure, so read the one the app shows, and treat it as an estimate.
What a liquidation looks like here
Liquidation starts when account value falls below maintenance margin, measured at the mark price. The sequence runs in stages:
- The system first sends market orders for the position to the book. If they restore the margin requirement, what is left stays yours. There is no clearance fee on top.
- For positions above 100,000 USDC, only 20% goes out at first, followed by a 30-second cooldown during which orders are for the full position.
- If equity drops below two thirds of maintenance margin, the liquidator vault, a component of HLP, can take the position over. You do not get the maintenance margin back. In cross mode, with no isolated positions, the account ends at zero.
- If an account still goes negative, auto-deleveraging closes profitable traders on the other side at the previous mark price.
Fees: what a trade really costs
Fees depend on your rolling 14-day volume, assessed daily at the end of the UTC day, with spot counting double. This is the official perps schedule as read on 30 October 2026, before discounts.
| Tier | 14-day weighted volume | Taker | Maker |
|---|---|---|---|
| 0 | below $5M | 0.045% | 0.015% |
| 1 | above $5M | 0.040% | 0.012% |
| 2 | above $25M | 0.035% | 0.008% |
| 3 | above $100M | 0.030% | 0.004% |
| 4 | above $500M | 0.028% | 0.000% |
| 5 | above $2B | 0.026% | 0.000% |
| 6 | above $7B | 0.024% | 0.000% |
Nearly every reader sits at tier 0. Our own arithmetic: a market order for 1,000 USDC of notional pays 0.45 USDC to open and 0.45 to close. Note that the fee applies to the position, not to your margin: at 10x, those 0.90 USDC are 0.9% of the 100 USDC you put up. Spot starts at 0.070% taker and 0.040% maker.
Funding comes on top, and it never touches the exchange: it passes between longs and shorts, every hour, with no fee taken. The interest component is fixed at 0.00125% per hour, paid to shorts, and a premium moves with the gap between the perp and the oracle. On a 1,000 USDC position, the base rate alone is 0.0125 USDC per hour, or 0.30 USDC per day (own calculation). The cap is 4% per hour, far above that base level, and the docs note it is less aggressive than the caps on centralised venues.
Other items change the bill:
- Staking HYPE gives a discount, from 5% above 10 HYPE (Wood) to 40% above 500,000 HYPE (Diamond), which takes tier 0 to 0.0270% taker and 0.0090% maker. On a 1,000 USDC order the Wood discount saves about 2 cents (own calculation), and holding HYPE adds price risk.
- Third-party front ends can charge builder fees, up to 0.1% on perps and 1% on spot per the builder codes page. You approve a maximum per builder and can revoke it at any time. Read the figure before signing, since at 0.1% a builder fee is more than twice the tier 0 taker fee.
- A referral code gives a 4% discount on your first 25 million dollars of volume, and the referrer earns 10% of your fees, less that discount. So anyone sharing a link may have a stake in your trading.
Withdrawing: the steps, the wait and the fee
- Close your positions or free the margin. With positions open, funds can only leave if what remains covers the initial margin and at least 10% of total open notional.
- Click Withdraw, choose the amount and destination, and read the fee and time estimate in the window.
- Sign the request. On the bridge route this needs a signature on Hyperliquid only, no Arbitrum transaction and no ETH: validators handle the other side.
- Check the arrival in your wallet on the destination chain, then write down the date and amounts for your records.
Hyperliquid’s bridge page says funds arrive in 3 to 4 minutes; its API page says about 5 minutes and mentions a 1 dollar fee “at the time of this writing”, with no date. Third-party guides disagree on whether the dollar comes out of the withdrawn amount or the remaining balance, and the page does not settle it. Circle’s own CCTP guide describes a HyperCore fee plus, with automatic forwarding, an additional 0.2 USDC initially for Arbitrum. So trust the window in the app, not a number from a blog, including this one. We found no official minimum withdrawal figure.
If a withdrawal of BTC, ETH or SOL fails, that route belongs to Unit, and the docs point there for support. Save your trade and funding history at the same time, since you will need it for tax.
How decentralised is Hyperliquid, really?
What runs on-chain
Quite a lot. The docs say HyperCore “does not rely on the crutch of off-chain order books”, and their introduction says every order, cancel, trade and liquidation happens transparently with one-block finality. Anyone can read positions, a real difference from a centralised exchange. The harder questions are who runs the machine and who can change the result.
Who runs the chain: a stake table
We read the validator list from the official info API on 30 October 2026: 35 validators, 27 of them active, about 442 million HYPE staked with the active set.
| Validator (name as listed in the API) | Share of active stake |
|---|---|
| Hyper Foundation 2 | 12.3% |
| Hyper Foundation 1 | 11.9% |
| Hyper Foundation 3 | 11.7% |
| Hyperliquid Strategies x Unit | 8.8% |
| Hyper Foundation 4 | 7.8% |
| Anchorage By Figment | 6.4% |
| Hypurrscanning | 5.3% |
| Nansen x HypurrCollective | 4.8% |
| infinitefield.xyz | 3.9% |
| Hyper Foundation 5 | 3.4% |
| The 17 other active validators | 23.8% |
The five validators labelled Hyper Foundation add up to about 47% of active stake. The label is the API’s: it implies, but does not prove, a single operator. If they do act together, the arithmetic is plain. Consensus of this family tolerates less than one third of faulty stake, so that group alone could halt the chain. It could not reach two thirds on its own, though; it would need about 20 more points. The three largest validators already pass one third between them, at about 36%.
Hyperliquid says it wants this to spread. Its delegation programme aims to “Promote diversity across the validator network to enhance decentralization”, with the Foundation, which may stop at any time, delegating to chosen applicants who pass KYC. That is progress decided by the party it is meant to dilute.
The bridge and the node software
Money on the Arbitrum side sits behind signatures. Bridge2.sol states that withdrawals and validator set updates “are approved by 2/3 of the validator power”. They then wait through a dispute period during which any locker can freeze the bridge, and once it is locked, only a quorum of validators’ cold wallets can reopen it. The docs say the legacy bridge was audited by Zellic. But the guarantee is a validator quorum, not a mathematical proof. Hyperliquid’s pages give no length for that dispute period; the deployed contract returned 200 seconds when we read it through a public Arbitrum node on 30 October 2026, which fits the 3 to 4 minutes on the bridge page. Native USDC moves part of the trust to its issuer, Circle.
The node is the other gap. The hyperliquid-dex/node repository carries setup instructions and downloads signed binaries; the consensus source code is not there. In January 2025 the Hyper Foundation wrote, in a post quoted by The Block: “Yes, the node code is currently closed source, but open sourcing is important.” In February 2026 Kyle Samani, the former Multicoin co-founder, was still calling it closed source. We found no official announcement that this has changed. As far as we can tell, validators and outsiders run a program whose source they cannot read.
JELLY, March 2025: the day the validators voted
Back to the opening scene. According to CoinDesk, citing Lookonchain, a trader allegedly held about 4.85 million dollars of JELLY while running a short on Hyperliquid. The short was liquidated, HLP inherited it, and buying on spot markets pushed the price up against the vault. That is an allegation drawn from on-chain readings; no court has ruled on it. HYPE fell about 20% during the episode. Hyperliquid’s statement: “After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps.” The Foundation promised to make users whole, “apart from flagged addresses”.
Both sides of the argument are fair. HLP’s depositors escaped, and CoinGecko Learn puts the vault’s result on the position at a profit of about 703,000 dollars. But the settlement price was chosen after the fact, far from the oracle. Arthur Hayes, the BitMEX co-founder, posted on X the same day: “Let’s stop pretending hyperliquid is decentralised”. Today the delisting page sets a rule: validators vote, and perps settle at the one-hour time-weighted spot oracle price before the scheduled vote. The vote itself remains. If it is weighted by stake, which the page does not say, the five Foundation-labelled validators hold 47% of it.
The risks, one by one
| Risk | What happens | Dated example or limit |
|---|---|---|
| Liquidation | You lose margin, and the maintenance margin too in a backstop | $1.99 billion liquidated in 30 days to 30 October 2026 (DefiLlama) |
| Auto-deleveraging | A winning position is closed against your will | 10 October 2025 |
| HLP vault, if you deposit | Your capital takes the venue’s market making and liquidation losses | $4.9 million bad debt, POPCAT, 12 November 2025 (CoinGecko Learn) |
| Bridge and contracts | A validator quorum or a bug affects funds | 2/3 of validator power signs withdrawals |
| Validator intervention | A market is delisted and settled by vote | JELLY, 26 March 2025 |
| Third-party markets | A HIP-3 deployer sets the oracle and limits | Deployer stakes 500,000 HYPE |
| Front ends and phishing | A fake site or a bad signature drains the wallet | No fixed limit: a separate wallet caps it |
| Regulation and recourse | No licence anywhere, and the terms deny recourse against the app’s company | Terms of use, 15 June 2026, sections 1.3 and 2.3 |
Auto-deleveraging and 10 October 2025
The ranking is public: mark price over entry price, times notional over account value. So the most profitable and most leveraged traders on the other side go first. On 10 October 2025, about 19 billion dollars was liquidated across the market in 24 hours, more than 10 billion of it on Hyperliquid, by CoinGecko Learn’s count. The event triggered the venue’s first cross-margin auto-deleveraging in over two years. The same source reports no bad debt and an estimated 41.5 million dollars added to HLP’s result.
Being closed can hurt a trader who was right, if the position was a hedge. BitMEX’s annual report, as covered by CoinMarketCap, says ADL that day closed market makers’ short futures held against long spot, leaving the spot unhedged; the coverage does not name the exchanges, and Hyperliquid’s ADL page does not mention hedges. Our own reasoning, not a documented case: ADL acts on one position, so a short perp here that hedges spot held elsewhere could be closed while the spot stays open.
The cost is contested. On 9 December 2025 Tarun Chitra, chief executive of Gauntlet, argued that about 650 million dollars was auto-deleveraged in excess from profitable traders, 28 times the potential bad debt, Protos reported. Hyperliquid’s Jeff Yan replied the next day that ADL “treats HLP entirely symmetrically with users” and accused him of spreading lies. Chitra’s own paper, in its February 2026 version, gives a far smaller money figure: 45.0 to 51.7 million dollars of excess profit lost, with 653.6 million described as a stylised measure in equity dollars. It also counts 2.1 billion dollars of positions closed in 12 minutes. These are one critic’s estimates from public data. We found no independent audit that settles them, and we take no side.
The HLP vault is a risk position, not a savings account
HLP, which the docs call fully community-owned, runs market making and liquidation strategies and receives part of the fees, with a four-day lock-up after your latest deposit. CoinGecko Learn counts 136.9 million dollars of cumulative profit since May 2023, with about 41% of it from two events, and vault deposits falling from a 603.9 million peak in September 2025 to about 268.6 million by June 2026. Past results come from rare, large days. The same days could go the other way.
HIP-3: markets run by someone else
HIP-3 lets a builder who stakes 500,000 HYPE deploy a perp market on the same engine, defining the oracle and the leverage limits. The deployer can also halt a market and close positions at the mark price. Validators can slash that stake by a stake-weighted vote for irregular conduct, and slashed tokens are burned, not paid to users who were harmed. Hyperliquid’s terms say markets shown in the app are “not reviewed, verified, or approved by the Company”. So a market in the same interface can have a different operator behind it: find out who deployed it and where its oracle comes from, and note that the delisting rule above covers validator-operated perps.
Tax: unsettled, and worth saying so
In the US the IRS treats digital assets as property, and how realised perp profits, funding and liquidations should be reported is not spelled out; we will not claim any particular regime. The UK has HMRC’s general crypto guidance, and we found nothing specific to on-chain perps. Our guides to crypto taxes in the United States and the United Kingdom cover the basics. We also found no French or Italian tax authority source on perps. Keep the full history, and see a professional if the amounts matter.
Before the real order, write down your exit
Write three numbers before any real trade: the most you can lose, the price at which you leave, and the liquidation price shown by the app. If the gap between the last two feels small, reduce the size or stop. Staying on the testnet, or using no leverage at all, are both reasonable answers, and so is deciding this venue is not for you.
The next lesson moves from perpetuals to synthetic assets and tokenised stocks, where the question changes from who can close your position to what you really own.
