Winner Hypur

Hyperliquid Believer

[Winner Hypur @Winner_Hypur]

It's feels good to join Hyperliquid community.

[Hyperliquid @HyperliquidX]

By community request, you can now long or short $SOPH with up to 5x leverage.

[jeff.hl @chameleon_jeff]

Thank you to everyone who took the time to thoughtfully respond to my post on transparent markets. I understand that the thesis is controversial and that Hyperliquid is at a new frontier as the first fully transparent order book venue of its scale.

I could well be mistaken, and welcome the continuous dialogue on market structure innovation. However, many criticisms I saw stemmed from misunderstandings, with some points actually supporting transparent systems like Hyperliquid. Market structure is notoriously counterintuitive, and novel approaches often challenge established paradigms, leading to understandable skepticism.

For example, Hyperliquid pioneered protocol-level cancel prioritization, which has since been implemented by new DEXs and even inspired novel transaction ordering ideas on other blockchains. But at the time, it was considered controversial because it went against traditional market design. I hope that transparent trading will follow a similar path to adoption.

I may have been too ambitious trying to cover a complex argument in a single post. Given the specific patterns in criticisms, I'd like to take this opportunity to zoom in on nuances that were missed in the high level summary. What follows is an argument for the final state of efficient markets, with the understanding that Hyperliquid is far from fully efficient today. However, inefficiency is opportunity for those hungry to act. Hopefully this post can also be a call to action for traders, market makers, and builders to translate transparent markets into the highest quality execution venue for all.

--

Before delving into specific concerns, let’s crystallize some counterintuitive principles that can form a helpful mental model for market structure:

1. Counterparty principle: Benefits of counterparty curation are misattributed to privacy.

Users ultimately care about execution. As studies have shown though, privacy sells. Alternative trading venues often market privacy as the causal feature for improving execution. In reality, the primary source of benefit for users is the screening of counterparties allowed to participate on the venue. Hyperliquid’s market design provides these same benefits more directly and effectively than patchwork solutions. Hyperliquid’s solution also democratizes access, improving execution for all traders large and small.

Note that transparency does not mean doxxing. Of course, the exact identity of some traders will fundamentally change the value of the asset. But those traders need not dox themselves, e.g. Warren Buffet can buy BTC and benefit from transparent markets, without tying his identity to his address.

2. Competition principle: Maximizing competition is key to improving execution.

Many traders who want to execute in size have some form of alpha. However, the group of informed medium/long term traders in aggregate is difficult to distinguish even over yearly timeframes, as their realized sharpe is too low for statistical significance. It is challenging to distinguish between a trader with solid medium term alpha and a degenerate gambler who got lucky. Therefore, while the desire to minimize market impact and alpha leakage is natural, it’s usually outweighed by the improved liquidity from transparent markets.

Traders therefore see improved execution despite revealing their strategy, as market makers are bound to provide liquidity to the entire range of flows in the market. Competition is the bedrock of capital markets and economics. As an example, the Hyperliquid order books support an onchain TWAP. Such a broadcasted intent to trade is in fact a reasonable proxy for optimal execution. Market makers will immediately fill some size so that the earlier TWAP orders receive worse execution, but will also compete to fill the remaining flow. The competition between market makers ensures near optimal overall execution over the course of the TWAP. Any inefficiency in execution is an opportunity for another market maker to undercut the others.

3. Repeated games principle: Execution improves when one-time games become repeated games.

Market makers evaluate each decision from a game-theoretical framework, as they are in the business of making positive expectancy bets. On Hyperliquid, every account placing more than one order is playing a repeated game. Repeated games have dramatically different optimal strategies from the one-time games of private venues, and the resulting equilibrium is better execution for everyone other than toxic extractors. Competition is essential for the optimal market marker strategy to benefit the end user, which is amplified by the next principle.

4. Full transparency principle: Benefits from transparency are non-linear and only manifest when transparency is at the system level.

When optimizing for execution, “the system knows” > “no one knows” > “some people know.” The worst of the three states is where some insiders have privileged information. Those insiders can act exploitatively to extract profit from end users. Because L3 books are not transparent in tradfi, the “darker” venues often implement systems to unilaterally apply counterparty-specific filtering to trades. Hyperliquid achieves the same effect on a lit venue and therefore maintains the benefits of efficient order book execution.

--

Common criticisms to the initial post, and my responses [I’ve bracketed references to the different principles]:

1. Many large desks in tradfi trade OTC, which is evidence that public venues cannot support large size.

Response: This point actually supports Hyperliquid. In tradfi's L3 books, there is no reliable way to broadcast your identity trustlessly to all counterparties. Using an OTC desk is a compromise, telling a small set of professional counterparties that you are non-toxic. Like trading on an L4 order book, trading OTC is a repeated game where the OTC desk is quick to ban any counterparties that adversely select a small fraction of quotes, or engage in otherwise toxic behavior [repeated games principle]. The OTC desks offer quotes where their own algorithmic execution/hedging costs are below the markup, which is only possible when their fills’ immediate markouts are positive.

A Hyperliquid whale who places an onchain TWAP order is effectively routing their flow to every "OTC desk" plugged into Hyperliquid. When OTC counterparties expand from a select few to all market makers, the competition improves execution for the user compared to the bespoke OTC quote [competition principle]. In summary, execution on Hyperliquid incorporates the efficiency of lit venues with the counterparty signaling of OTC. This high quality execution is available to all users equally.

2. A large percentage of tradfi volume happens on dark pools, retail internalizer systems, etc.

Response: This argument also supports Hyperliquid. The basic idea behind dark pools is that two large whales with a "coincidence of wants" can match immediately and bypass the spread that lit markets charge. Until such a match exists, orders are attempted to be kept private to reduce market impact. While a neat idea at first glance, the privacy of dark pools is unlikely to meaningfully protect intentions or improve execution. For example, sophisticated actors participate in dark pools themselves. At a minimum, their fills are a strong signal on the supposedly private flow. This shares many parallels with the insider information discussed in the following section. Information that will be deduced anyway is better made public [full transparency principle].

As another argument against the effectiveness of privacy properties, dark pools rely heavily on participants having identities known to the pool operator [repeated games principle]. This is necessary because the private information is easily leaked. There are strict requirements for participation, e.g. high fill rate, minimum order size, and negative short term markouts. Offenders with toxic behavior are banned or deprioritized [counterparty principle]. Like OTC desks discussed above, transparent L4 books on Hyperliquid incorporate and improve upon many of these positive properties of dark pools within an open, systematic framework.

3. Public data allows hunting of liquidations/stops.

Response: Most would agree that unlike size information, preserving margin privacy is beneficial for the end user. Perhaps a ZK privacy implementation can accomplish this in the future. However, until then, users are less likely to be successfully hunted if everyone knows liquidation and stop prices than when only the exchange operator knows [full transparency principle]. Two reasons:

a. On CEXs, your position information is far from private. Based on empirical data of insider trading leading up to listings, one should assume that liquidations and stops are also vulnerable to misuse. This can be despite best efforts from management: it is extremely difficult to completely control large organizations from leaking information. When insiders hunt stops and liquidations, there is no public data for other market makers to understand the source of the temporary dislocation. This decreases the required capital to successfully push the price.

b. In the game theoretical equilibrium of transparent data, stop and liquidation hunting are likely unprofitable endeavors on average. Whales are protected by the entire system of market participants acting rationally. People trying to hunt liquidations and stops will be counteracted by people trying to trick them into the hunting. For example, someone who wants to open a large long position can execute half of their position on high leverage, bait the hunters to short, then increase collateral and enter the remaining desired position at a more favorable price. As long as some profit seeking “anti-hunters” exist, all whales benefit from the cover.

While point (b) will take time to play out, markets are ultimately efficient. Even before this equilibrium is reached, the full transparency principle in point (a) suggests Hyperliquid's model offers more robust protection for whales. Liquidity is generally deeper when lit venues are more transparent [competition principle], which further increases the cost of liquidation and stop hunting.

4. Some users have alpha and will not benefit from transparency.

Response: The users that are disadvantaged by Hyperliquid’s system are a very small set of “toxic” participants. These are the same adversarial traders that dark pools, OTC desks, and other solutions try to avoid. A small number of professional HFT firms have alpha on this timescale, and it’s a failing of traditional market structure that these toxic takers have the ability to tax all other users of the system.

As an aside, short term alpha and toxicity is a continuous spectrum, so I’m oversimplifying for sake of argument. For example, there are intraday quantitative strategies that can realize significant sharpe ratios, whose flow could be a reliable momentum signal for market makers. The technical reason this is not a problem is that cost to rotate accounts is proportional to fee sensitivity of the strategy, which is inversely proportional to the time it takes for others to detect the strategy with statistical significance. In other words, the more execution matters to a quant strategy, the less the burden of obfuscation.

Regardless, the vast majority of users on Hyperliquid do not fall remotely close to this category of quantitative, toxic alpha. Note that “toxic” does not mean “informed,” but rather traders who profit non-constructively from slight infrastructural or other structural advantages such as latency. Hyperliquid's cancel prioritization and L4 order book essentially boost the short term liquidity available to non-toxic small and large orders, respectively. As a conservative lower bound, as long as market maker counterparties on Hyperliquid can hedge in time on other venues, the trader benefits from Hyperliquid’s system.

--

I know I’ve missed other points, but will stop here to keep this post digestible. Thanks again to everyone for their thoughtful feedback, especially those who took time to review an earlier version of this post. I look forward to continuing this discussion!

[USDT0 @USDT0_to]

XAUt0 is live on @HyperliquidX and HyperCore.

The oldest store of value, now on the blockchain to house all finance.

Your gold, now on Hyperliquid.

[Hyperliquid @HyperliquidX]

By community request, you can now long or short $RESOLV with up to 3x leverage.

[Hyperliquid @HyperliquidX]

Listing is not an endorsement of the project. Past performance does not guarantee future results. Do not trade assets you are unfamiliar with and do not understand the risks for. Exercise control. NFA.

https://t.co/y5mVbwLpt1

[etherscan.eth @etherscan]

Announcing HyperEvmScan, a block explorer for HyperEVM

[Hyperliquid @HyperliquidX]

By community request, you can now long or short $SYRUP with up to 3x leverage.

[Hyperliquid @HyperliquidX]

As a reminder, hyperps do not rely on any external data for the oracle price. Hyperps trade like perpetual contracts that users are familiar with, but do not require an external spot or index oracle price. Instead, the funding rate is determined relative to a moving average of the hyperp mark price. This makes the hyperp price more stable and less susceptible to manipulation, unlike usual pre-launch futures.

When trading hyperps, funding rates are important to consider. If there is heavy price momentum in one direction, funding will heavily incentivize positions in the opposite direction for the next eight hours. As always, be sure to understand the contract before trading.

Trading is on low leverage and isolated margin only. Beware of low liquidity, high volatility, potentially extreme funding, and increased liquidation risk. Note: $PUMP-USD will convert to a vanilla perp upon CEX spot listing. See Docs for more.

$PUMP-USD is a hyperp contract that poses higher than normal risk. Do not trade contracts you are unfamiliar with and do not understand the risks for. Read the Docs to learn more about the hyperp mechanism and how it differs from vanilla perps. NFA.

https://t.co/0wWMn2XsX5

[Hyperliquid @HyperliquidX]

By community request, Hyperliquid has listed PUMP-USD hyperps. You can now long or short the unlaunched $PUMP token with up to 3x leverage.

[Hyperliquid @HyperliquidX]

Hyperliquid reached a new all-time high of >$10.6B in open interest.

[Hyperliquid @HyperliquidX]

Hyperliquid hit a new OI ATH two days in a row. This time of >$11.3B.

[Hyperliquid @HyperliquidX]

Listing is not an endorsement of the project. Past performance does not guarantee future results. Do not trade assets you are unfamiliar with and do not understand the risks for. Exercise control. NFA.

https://t.co/Ua1t2tLL32

[Unit @unitxyz]

PUMP spot deposits, withdrawals, and trading are now officially live on Hyperliquid.

Deposit PUMP on https://t.co/uJWeiSHH79 or https://t.co/Rg4Ub2t2Or

Trade spot PUMP at https://t.co/rDKP18pwFz

[Rabby Wallet @Rabby_io]

Rabby Wallet now tracks your Hyperliquid balance.

Stay on top of your portfolio anytime, anywhere.

[Hyperliquid @HyperliquidX]

The PUMP hyperp has converted to a regular perp. You can now long or short $PUMP with up to 5x leverage.

[Hyperliquid Community Hackathon @hl_hackathon]

Announcing the Hyperliquid Community Hackathon.

A 4-week, global online event to build the future of finance.
💰 Over $160,000 in prizes
⭐ Powered by 35+ Hyperliquid aligned sponsors
📅 Registration opens July 28
More details to come. Follow for updates.

Hyperliquid

[Hyperliquid @HyperliquidX]

Last week, Hyperliquid was the first major venue to offer PUMP prelaunch trading. It became the main platform for price discovery leading up to PUMP’s highly anticipated TGE, with over $400M in open interest and $600M in 24h volume as a prelaunch perp.

Following TGE, Hyperliquid was also the first major venue to offer spot trading of PUMP through @unitxyz. It remains one of the most liquid venues to trade PUMP spot.

Hyperliquid continues to support the movement of capital formation and price discovery onchain. This trend is reflected in four consecutive days of open interest all-time highs. Today’s OI reached $12.1B.

[Winner Hypur @Winner_Hypur]

The future is here!

I'm hyped about the AI agents on #Base!

Which ones are you most bullish on? 🔥 Let's see the top contenders! 👇

$VIRTUAL $AIXBT $GAME $VADER $TIBBIR $LUNA $AIXCB $ACOLYT $BILLY $BRO $SEKOIA $CONVO $TAOCAT $BRAIN $TRUST $AIV $SYMP $VU $SERAPH $SHEKEL

[Winner Hypur @Winner_Hypur]

JUST IN: AI agents are taking off on Base! 🚀

Which project is more hyped? 🤔 Drop your pick! 👇

$VIRTUAL $AIXBT $TRAI $GAME $VADER $TIBBIR $LUNA $AIXCB $ACOLYT $BILLY $SEKOIA $CONVO

Let's see what #Base community loves! 🚀 #AIFuture