Hyperliquid has strongly denied claims that its protocol lacks enough collateral, stating that its on-chain assets are over $4.3 billion and that all user funds are properly managed.
The detailed rebuttal comes after a widely shared article questioned the financial integrity and transparency of one of crypto’s largest on-chain derivatives venues, which has more than $4.1 billion in total value locked (TVL) according to DefiLlama.
Point-by-Point Refutation of Allegations
Hyperliquid’s response, posted on X on December 22, pointed out that the insolvency allegation stemmed from an accounting error rather than a real shortfall. The protocol explained that the author of the article in question failed to include native HyperEVM USDC balances, which run alongside the Arbitrum bridge. When both are counted, Hyperliquid said total USDC on HyperCore stands at $4.351 billion.
“The Hyperliquid blockchain state is fully and verifiably solvent,” the team wrote, adding that “every dollar is accounted for” and that anyone can independently confirm balances by running a node and checking on-chain data. The protocol also rejected claims of retroactive volume manipulation, saying the cited functions exist only on testnet and are used for stress-testing fee logic.
“Testnet-only features that enable more rigorous testing of edge cases do not undermine the chain’s integrity,” it wrote.
It also noted that those code paths are unreachable on mainnet and will be removed entirely to avoid confusion. Other allegations touched on supposed “god mode” privileges, oracle control risks, liquidation cartels, hidden lending activity, and the ability to freeze the chain through governance.
However, Hyperliquid said these points reflected misunderstandings of its architecture. For example, it explained that CoreWriter can’t create tokens or transfer user money without approval, the prices for validator-run perps come from an average of major exchanges, and liquidation support is managed by a community-owned liquidity pool that anyone can access.
“Every order, trade, and liquidation is available in real time during execution,” the team said.
They also argued that the decentralized exchange’s fully on-chain design offers stronger guarantees than competing perps venues with centralized sequencers.
Price Pressure Amidst Major Supply Proposals
Hyperliquid’s defense of its fundamentals comes at a volatile period for its native HYPE token. After reaching an all-time high near $59 in mid-September, the asset fell dramatically, and at the time of writing, it was trading around $25, representing a decline of approximately 24% over the past month and about 60% from its peak.
Meanwhile, there have been significant supply-side developments, with the Hyper Foundation proposing a validator vote to permanently burn about 37 million HYPE tokens, which is roughly 10% of the circulating supply and is currently held in its Assistance Fund.
If approved, nearly $1 billion worth of tokens would be removed from supply. Validators are set to decide on the proposal by December 24. However, this deflationary move is set against an upcoming token unlock of 9.92 million HYPE scheduled for December 29, which could introduce further selling pressure.
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