In recent developments, the token HYPE — native to the Hyperliquid Provider (HLP) market-making system — is facing mounting headwinds as prolonged selling pressure and a significant loss at HLP have shaken investor confidence.
Market Context & Key Figures
As of the latest update, HYPE is trading around US$38, following a drop of roughly 8% since the start of the week — marking its third consecutive week in the red.
Crucially, HLP, the market-making arm of the system, recorded a loss of approximately US$4.9 million during a stress test event.
Data from CoinGlass show that HYPE’s open interest (OI) in futures contracts fell to about US$1.56 billion from a peak of US$2.08 billion at the end of October — highlighting waning speculative demand.
How Did HLP End Up With Such a Loss?
Let’s unpack the scenario:
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HLP is responsible for providing liquidity and market-making capabilities for the decentralized exchange environment in which HYPE operates.
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During the stress test, one trader in the POPCAT token (another token in the ecosystem) suddenly allocated about US$3 million into 19 separate wallets, placing large buy-walls around US$0.21, and then opened a long position worth close to US$30 million.
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When that buy-wall was pulled or canceled, liquidity dried up. The price of POPCAT swiftly fell below multiple liquidation thresholds, and HLP, which had to backstop these positions in thin liquidity conditions, incurred the loss.
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Simultaneously, HLP paused the bridge on the Arbitrum network (although deposits/withdrawals remained active).
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With retail interest tepid and futures OI dropping, the overall environment appears weak.
Technical Picture: Danger Ahead for HYPE
From a technical analysis perspective:
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HYPE is currently trading below its 200-day exponential moving average (EMA), which is around US$39, having failed to break above the 50- and 100-day EMA resistance near US$43.
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The Relative Strength Index (RSI) is down to around 43, reversing downward from the neutral zone — suggesting increasing selling momentum.
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The next major support to watch is US$35. If HYPE closes below this level, there is potential for a drop toward the next support around US$30, which was the bottom recorded on May 30.
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Conversely, if HYPE can rebound and push above US$42, it might aim for the psychological resistance target near US$50. But given the current backdrop, that appears less likely in the near term.
Implications & Risks for Investors
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The substantial loss by HLP underscores the risk inherent in thin-liquidity, high-leverage environments — particularly when large players can manipulate order-books or enter concentrated positions.
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Weakening open interest and declining retail demand suggest that the broader speculative appetite for HYPE is diminishing, which could hamper any meaningful rebound.
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For holders of HYPE, the drop below US$35 could signal deeper downside, meaning risk management becomes critical.
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The situation also raises broader questions about how robust HLP’s risk management and stress-testing frameworks are — especially given the volatility inherent in DeFi derivatives and market-making.
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As always, this should not be construed as investment advice. Crypto markets are high-risk and highly volatile. Thorough individual research and appropriate risk controls should be in place.
Closing Thoughts
In summary: HYPE is under sustained pressure amidst a weakened technical configuration and declining market interest. The heavy loss experienced by HLP serves as a stern reminder of the fragility within certain segments of the crypto derivatives and DeFi ecosystem. If support around US$35 is breached, a more pronounced correction may be set in motion. Investors should proceed with caution and maintain disciplined risk management.
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