TLDR
- Hyperliquid open interest dropped from $13.8B to nearly half in a week.
- Post-liquidation, trading volume increased by 17% despite lower OI.
- Daily liquidations rose by an average of 70% in the seven days after.
- Over $7.4B in OI was wiped out, including nearly $3B from altcoins.
A sharp shift in trading behavior has followed a major liquidation event on Hyperliquid. The platform saw open interest fall by nearly 50%, yet trading volume rose in the days after. This unexpected trend suggests that traders may be chasing fast recoveries after heavy losses. Rising liquidation data adds pressure, pointing to increased risk-taking rather than recovery.
Open Interest Falls as Liquidations Surge
Before the liquidation event, Hyperliquid’s open interest stood at approximately $13.8 billion. About one-third of this was tied to altcoins, excluding major tokens like BTC, ETH, and SOL. The liquidation wiped out nearly $7.4 billion of this open interest, with $3 billion in altcoins alone.
A week later, open interest remained well below pre-cascade levels. While there was a slight recovery from the initial drop, it has not been enough to signal a full rebound. Traders appear to be re-entering the market cautiously or are avoiding rebuilding large positions after losses.
During this period, average daily liquidations jumped by 70%. This data suggests that many traders tried to quickly recover their positions but instead faced more losses. As positions were forced to close, it showed that trading strategies may have shifted to short-term and high-risk plays.
Trading Volume Climbs Despite Lower OI
Hyperliquid’s trading volume moved in the opposite direction compared to open interest. In the seven days before the liquidation, daily trading volume averaged $10 billion. Surprisingly, in the seven days after the event, daily volume rose by 17%.
This rise came even though open interest stayed far below earlier levels. The contrast points to more frequent trading by smaller positions or quicker turnover of capital. Many traders may have tried to recoup losses fast, a practice known in the trading community as “revenge trading.”
The increase in volume without matching open interest shows that traders were opening and closing positions more quickly than before. This type of behavior often happens after large market moves, especially when traders are emotionally affected by recent losses.
Rising Risk and Trader Losses Post-Cascade
The 70% increase in daily liquidations after the cascade suggests traders were not successful in their attempts to recover. Forced liquidations often happen when markets move against a position sharply, and traders lack margin to cover losses.
This pattern shows that after the event, trading behavior turned more speculative. Many market participants may have taken higher risks, possibly due to urgency to recover earlier losses. This behavior often leads to repeated losses and deeper financial problems for retail traders.
It also suggests that some traders may not have adjusted their risk settings or position sizes in response to higher market volatility. Without changes in strategy, even small market moves can trigger another wave of forced closures.
Platform Response and Industry Transparency Concerns
On October 13, Jeff Yan, cofounder of Hyperliquid, publicly criticized some centralized exchanges. He said they had underreported liquidation data by as much as 100 times during the recent wipeout. His remarks brought more attention to transparency in reporting liquidations across trading platforms.
On the same day, Hyperliquid launched an upgrade that allows for the permissionless deployment of perpetual futures markets. This feature gives users more flexibility to create markets, though its impact on trading behavior is yet to be seen.
This period has tested both platform operations and trader resilience. With increased volatility, transparency and risk controls remain critical in how trading platforms respond to market stress.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
