Hyperliquid’s HLP vaults are still leaking total value locked (TVL) following a whale-led exploit that drained $4 million from the protocol. Confidence remains shaken despite the project implementing safeguards to prevent a repeat of the incident.
TVL Plunges as Confidence Wanes
Just days before the exploit, Hyperliquid’s vaults held over $500 million in TVL, according to DeFiLlama. But on March 12, the day after the attack, that number plummeted by almost 30%, settling at $354 million.
Since then, the decline has continued. As of now, the vaults’ TVL has dropped further to $312 million. That’s a 38% decline from March 11, raising concerns about long-term confidence in the platform.
One of the main reasons? Users remain wary of Hyperliquid’s ability to fully secure its vaults, even after modifications to its margin design.
How the Exploit Happened
A whale exploited the system by opening an enormous $250 million short position. The next step? Withdrawing their margin, triggering a forced liquidation that the HLP vaults had to cover. This left the protocol footing the bill for millions in losses.
In response, Hyperliquid quickly adjusted its margin structure, aiming to ensure the same attack couldn’t happen again. The update was put to the test on Monday when another whale closed a $500 million short position. This time, no issues were reported, and the vault remained profitable.
But the damage was already done.
Market Share Grows Despite Setback
Interestingly, Hyperliquid is growing in other ways. On February 28, the decentralized exchange (DEX) passed a massive milestone: $1 trillion in total perps trading volume, per DeFiLlama.
Even more notable, Hyperliquid’s market share among perpetuals trading platforms has surged. Dune Analytics data shows it now controls nearly two-thirds of the market.
The juxtaposition is striking—TVL is falling, but the platform’s influence in the perps space is expanding.
What’s Next for Hyperliquid?
- TVL erosion remains a major concern, as investors appear hesitant to redeposit funds.
- Market dominance continues to rise, suggesting traders still see value in the protocol’s offerings.
- Further security improvements could be necessary to restore full confidence in the vaults.
For now, the bleeding hasn’t stopped. But if Hyperliquid can maintain its perps trading dominance while shoring up TVL, it could cement its position as a major player in the space. The next few months will be telling.
