Hyperliquid’s native token, HYPE, surged to a new record high following a significant increase in trading activity and open interest on the platform.

This momentum mirrors the broader market upswing driven by Bitcoin’s latest price milestone and coincides with Hyperliquid’s public response to regulatory discussions with the US Commodity Futures Trading Commission (CFTC).

Hyperliquid’s open interest

According to data from CoinGlass, Hyperliquid’s open interest is approaching the $12 billion mark, reaching $9.4 billion on May 23.

This number represents a 53% climb from the platform’s previous peak of around $6 billion, registered earlier in the month.

Open interest tracks the total number of active futures and perpetual contracts, often rising when market sentiment strengthens.

With Bitcoin price rising to a new all-time high above $111,000 on May 22, investors’ appetite for derivatives grew, and platforms like Hyperliquid experienced a sharp uptick in trading activity on their platform.

Engagements with CFTC

Meanwhile, amid the growing attention on the platform, Hyperliquid Labs submitted two comment letters to the CFTC.

These responses addressed the agency’s open calls for feedback on perpetual derivatives and 24/7 crypto trading.

In the letters, the company outlined how its decentralized infrastructure supports transparency, self-custody, and composability, which are core benefits of on-chain perpetual contracts.

Hyperliquid also stressed that its platform offers continuous liquidity, real-time collateral management with pre-funded accounts, automated liquidations, and round-the-clock trading.

It also highlighted features like decentralized infrastructure and immutable audit trails, strengthening resilience and compliance readiness.

The company concluded:

“We believe that Hyperliquid exemplifies how core defi principles can be put into practice to enhance market efficiency, market integrity, and user protection. Supporting DeFi in the US with open dialogue and a clear regulatory framework is an opportunity to ensure the US remains a leader in financial innovation while robustly protecting users.”

HYPE climbs to new ATH

These regulatory engagements and advancements on the decentralized trading platforms aided HYPE’s climb to a new all-time high.

According to CryptoSlate’s data, the token joined the broader market rally, jumping over 12% in the last 24 hours to a new high of over $37. The digital asset has risen by over 95% in the previous 30 days.

However, not all traders have benefited from this run.

Blockchain analysis platform SpotOnChain reported that a large whale shorted 1.875 million HYPE tokens, worth over $57 million, at 5x leverage.

As prices spiked, the whale closed their position at a loss of $23.5 million, wiping out most of the $30.5 million USDC they had deposited to maintain the bet. Their remaining balance stands at just under $7 million.

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Following yesterday’s whale liquidation event on Hyperliquid, which saw the decentralized exchange (DEX) lose $4 million, some analysts are characterizing it as a necessary stress test that could ultimately strengthen decentralized finance (DeFi) protocols.

Others have even suggested that the incident could benefit Hyperliquid’s native HYPE token in the long run.

Lessons Learned

The loss occurred when a trader, identified by the wallet address 0xf3f4, opened a 175,000 ETH long position with 50 times leverage, valued at $340 million. After securing an unrealized profit of $8 million, the trader reportedly withdrew $17.09 million in margin, triggering an automatic liquidation of the remaining 160,000 ETH. Hyperliquid’s HLP vault absorbed the position at $1,915 per ETH, putting it $4 million in the red.

However, some analysts remain optimistic about the platform’s future. Prominent DeFi commentator Aylo argued that stress tests, like the one Hyperliquid went through, are necessary to improve protocol design.

“In this case, 1% hit on HLP was a very reasonable price to pay for the lesson learned and the apparent vulnerabilities discovered,” he said.

Additionally, he noted that while HYPE remains a risky investment given prevailing market conditions, its revenue stream and market share in the perps trading space make it undervalued.

According to data from DefiLlama, the token’s price-to-earnings (P/E) ratio stands at 7.06, which, in Aylo’s opinion, hints at a potential upside if Hyperliquid continues to grow.

In the aftermath of the liquidation, HYPE lost 8.5% of its value but recovered soon after. Still, the broader market jitters seem to have caught up with it, dropping 11.4% from its price in the last 24 hours and just under 28% across the week.

Ben Zhou Calls for More Risk Management Tools

Bybit CEO Ben Zhou also weighed in on the event, highlighting the risks associated with high leverage on both centralized and decentralized exchanges. In a post on X, he explained how the protocol’s liquidation engine took over the massive position and cushioned its impact by lowering leverage.

The crypto executive, whose company was recently on the wrong end of the largest hack in the industry’s history, suggested that DEXs must put in place stronger risk management mechanisms, including dynamic risk limits and market surveillance tools, to prevent similar occurrences in the future.

The incident has prompted Hyperliquid to lower its maximum leverage for Bitcoin and Ethereum to 40x and 25x, respectively. He pointed out that HLP had been operating successfully for about two years with minimal issues and that the team has a track record of quick responses to challenges.