Hyperliquid’s HLP Vaults Bleed TVL in Wake of $4M Exploit

Hyperliquid’s HLP vaults have been bleeding total value locked (TVL) since a whale exploited the protocol for $4 million.

On March 11, there was just over $500 million in TVL in the Layer 1 and perpetual decentralized exchange’s (DEX) vaults, according to DeFiLlama. The next day the exploit hit and the TVL plunged almost 30% to $354 million as a result of the exploit and loss of confidence it inspired.

Since then, the vaults have continued to bleed, with TVL now down to $312 million, down 38% since March 11.

$1 Trillion Mark

But it’s worth noting that all this is happening as Hyperliquid passed a major milestone on Feb. 28, when its total perps volume crossed the $1 trillion mark, according to DeFiLlama. Beyond that, Hyperliquid’s market share has grown to nearly two-thirds, according to Dune Analytics.

The exploit was a result of a whale building up a $250 million short position and then withdrawing their margin, causing a liquidation that the Hyperliquid HLP vault was forced to cover.

The protocol made changes to its margin design to avoid it happening again. Improvements were put to the test on Monday, when a whale with a $500 million short position closed it without repercussions, according to GuthixHL, a contributor to the Hyperliquid trading protocol PVP Trade.

“500m position closed in 5 minutes and HLP return remains positive + no issues,” GuthixHL posted on X, adding a somewhat questionable “Nothing ever happens. Hyperliquid.”

Still, TVL continues to bleed.