What Is Hyperliquid? Complete Beginner’s Guide

05/02/2026 admin

Where you trade is just as important as how you trade.

If you’re looking for speed and liquidity, go for a Centralised Exchange (CEX). If self custody and transparency is a higher priority, go for a Decentralised Exchange (DEX).

Whilst no DEX can replace a CEX, Hyperliquid is the closest contender: an L1 blockchain built for trading that delivers CEX-like performance with the power of on-chain.

Is this the future of finance? In this guide, we’ll break down:

What is Hyperliquid
How Hyperliquid works
How does it compared with other PerpDEX
The risks and mitigations

What Is Hyperliquid?

Hyperliquid is a Layer 1 Blockchain that hosts a decentralised perpetual futures exchange where you trade with leverage whilst maintaining custody of your funds. No KYC. No withdrawal limits.

The platform processes $4-7 billion in daily volume across 50+ perpetual markets. It’s built on its own Layer-1 blockchain by ex-MIT and Hudson River Trading engineers who prioritised one thing: matching CEX performance without CEX risk.

Unlike other DEXs, Hyperliquid utilises an on-chain Central Limit Order Book (CLOB) instead of a Automated Market Maker (AMM) model found on Uniswap (where liquidity providers passively pool assets).

Why this matters: Hyperliquid processes up to 200,000 orders per second with a sub-second latency with zero gas fees for placing or cancelling orders – whilst your funds never leave your wallet.

BitMEX now offers copy trading for Hyperliquid strategies. You get exposure to top Hyperliquid traders without managing a Web3 wallet yourself. We’ll explain how later.

How Hyperliquid Works

HyperBFT Consensus

Hyperliquid operates on a custom Layer-1 blockchain. Not Ethereum. Not Solana. Their own chain using HyperBFT consensus.

Most blockchains function synchronously – validators must agree on a block before starting the next block. HyperBFT allows for “optimistic responsive”, meaning that the network processes transactions as fast as the validators can communicate. The difference? Trade execution speeds rival off-chain matching engines and solving the latency issues that plagued earlier generations of DEXs.

HyperEVM

In 2025, Hyperliquid introduces HyperEVM which allows developers to build custom smart contracts that interact directly with the perps exchange.

Imagine building a lending protocol that can instantly tap into a DEX with deep liquidity without needing a slow cross chain bridge. The upgrade bridges high frequency trading and programmable finance.

At the heart of the Hyperliquid ecosystem, runs two core components: the HLP vault and the HYPE token.

HLP Vault

If you are not an active trader, you can still participate by depositing into the Hyperliquidity Provider (HLP) vault). This vault acts as the primary market maker for the platform by automatically quoting buy and sell orders across the exchange. It profits from the spread and realised PnL when traders lose, and it loses when traders win.

Think of it as being the house in a casino – over time, the edge favours the house, but individual sessions can go either way. This is not a risk-free yield farm as you’re taking the other side of the trader’s position.

Imagine Bitcoin rallies from $100,000 to $110,000 over two weeks. Most traders on Hyperliquid are long BTC with leverage. The HLP vault, as the counterparty, is effectively short. The vault loses as traders profit. Conversely, during choppy markets where most traders get stopped out, the vault profits consistently.

Alternative method: If you want exposure to Hyperliquid strategies without taking on market maker risk, BitMEX Copy Trading lets you copy individual traders. You can select traders whose strategies align with your risk tolerance, rather than being the house for all trades.

HYPE Token

HYPE is used for staking to secure the Proof-of-Stake network and serves as the gas token for the ecosystem. Holders can also propose improvements (HIP) to the platform such as new listings or adjusting fees.

You can also trade HYPE on BitMEX with up to 50x leverage here.

Hyperliquid vs The Competition

Feature	Hyperliquid	dYdX v4	GMX
Architecture	Custom L1 (HyperBFT)	Cosmos App Chain	Arbitrum L2
Order Type	On-chain CLOB	Off-chain CLOB	AMM (GLP/GM Pools)
Gas Fees	£0 (trading) HYPE (HyperEVM)	Low	£1-5/trade
Latency	<1 second	1-2 seconds	2-5 seconds
Throughput	200,000 TPS	Lower (Cosmos limits)	N/A (AMM model)
Maker Rebates	Yes (-0.0025%)	Yes	No
Self-Custody	Yes	Yes	Yes
Max Leverage	50x	20x	50x

On Ethereum-based DEXs like dYdX v3 or GMX, every trade costs gas. During the 2021 bull run, opening a position cost $50-100 in gas. If you’re a scalper making 30 trades daily, you’re spending $1,500-3,000 on fees before considering spread costs or slippage.

The Hyperliquid solution:

Zero gas fees for traders
10ms order execution latency
100,000+ orders per second capacity
Fully on-chain order book

What Makes Hyperliquid Different

Self-Custody Trading

When you deposit on a centralised exchange, you’re giving them an IOU. They credit your account, but they control the actual crypto.

On Hyperliquid, you connect your Web3.0 wallet like a MetaMask or Rabby. Your funds stay in your wallet and only those with access to your seed phrase/private key can control it. The platform can’t freeze your account, block withdrawals, or lend your collateral (unless you give it permission to do so). When you want to withdraw, you sign a transaction – please always double check what transaction you’re signing for.

The trade-off: You’re responsible for security. Lose your seed phrase? Send funds to the wrong wallet? There’s no support line to call. This is why many traders prefer copy trading through BitMEX – you get Hyperliquid exposure without managing Web3 wallets. Plus, you get the institutional-grade security of BitMEX, an exchange with a 11+ year track record of never losing customer funds.

Deep Liquidity

“DeFi equals low liquidity” was a huge meta back in 2020. In 2025, the DeFi landscape has evolved. Hyperliquid processes $2-7 billion daily with $500M+ TVL. On BTC and ETH perpetuals, you can execute $500,000+ orders with minimal slippage – comparable to Tier 2 CEXs.

Professional market makers provide this liquidity because:

Maker rebates pay them to quote
On-chain transparency means no hidden front-running
No counterparty risk (CEXs can selectively liquidate market makers)

Vaults

Not interested in active trading? Hyperliquid’s vault system lets you provide liquidity to HLP pools. As mentioned above, users can deposit into an HLP vault. Professional market makers borrow this liquidity.

As outlined earlier in this guide, you’re exposed to impermanent loss and market maker risk. If the vault takes bad trades, you lose capital. This isn’t a stablecoin yield farm. it’s active market making with corresponding risk.

No KYC

Hyperliquid doesn’t require KYC. Connect a wallet, deposit USDC, trade.

Who this benefits:

Traders in restricted jurisdictions
Privacy-conscious users
Anyone tired of uploading government ID to 15 different exchanges

Hyperliquid Risks

L1 and Bridge Risk

Hyperliquid runs on its own custom Layer-1. Whilst the code has been audited by Zellic and Certora, it has not weathered the decade of battle-testing that Ethereum has.

Additionally, funds are bridged from Arbitrum to Hyperliquid L1. Bridge smart contracts are historically common attack vectors in DeFi. From Ronin ($600M+ exploit) to Wormhole ($320M exploit), bridges have been prime targets.

Mitigation: Never risk more than 20% of your total portfolio on any single platform. If holding significant value on Hyperliquid, monitor the project’s security disclosures and consider diversifying across multiple venues.

Blockchain Downtime

In mid-2025, Hyperliquid went down for 37 minutes due to API issues. If you had open positions, you couldn’t close them. If price moved against you, you couldn’t adjust stop loss.

Real impact: Traders with 20x+ leveraged positions got liquidated during downtime because they couldn’t reduce leverage or add margin.

Mitigation:

Always use stop losses (they execute on-chain even if UI is down)
Don’t use maximum leverage
Keep some capital off-platform
Consider copy trading hyperliquid traders on BitMEX (CEXs don’t have blockchain downtime risk)

Funding Rate Spikes

During extreme volatility, funding rates can spike to 1-2% hourly. That’s 24-48% daily and eating margin faster than price moves.

Our 2025 derivatives report reveals that the funding rate on Hyperliquid historically fluctuates more.

Mitigation:

Check funding before entering
Avoid meme coin perps during hype cycles
Use 5x leverage maximum on high-funding assets
Set funding rate alerts

Hyperliquid vs CEXs

Should you trade on Hyperliquid or stick with BitMEX?

Choose Hyperliquid if you:

Choose CEXs like BitMEX if you:

Value self-custody over convenience

Want trading privacy (no KYC)

Are locked out of CEXs due to geography

Want on-chain transparency

Want customer support when things go wrong

Want to avoid the DeFi headache – managing seed phrases, bridging etc.

Want higher leverage and liquidity

Want other features such as fiat on-ramp, trading bots etc.

Value regulatory compliance

Choose BitMEX Hyperliquid Copy Trading if you:

Want both worlds
Want Hyperliquid strategy exposure without complexity
Are a passive investor
Want to diversify across multiple Hyperliquid traders
Value time over marginal leverage differences

Most professional traders use multiple platforms to diversify the risk and utilise each of their advantages. BitMEX for major positions, Hyperliquid for privacy focused trades, and BitMEX Copy Trading for passive Hyperliquid exposure.

The Bottom Line

With $4B+ TVL and $2-7 billion daily volume, Hyperliquid represents a credible alternative to centralised derivatives trading – self-custodial, transparent, and performant enough to rival CEXs.

However, the learning curve can be steep for beginners. Wallet management, gas fees, funding rates – is a whole job on its own. There’s a lot to track when it comes to DeFi transactions.

BitMEX’s Hyperliquid copy trading solves this. You get access to elite Hyperliquid strategies without the complexity. No Web3 wallet. No bridging. No seed phrases to manage. Simply browse, click, and copy the pros.

FAQ

Is Hyperliquid safe?

Hyperliquid is as safe as DeFi gets—audited by top firms, $4B+ TVL, experienced team. But „safe“ is relative. You’re responsible for wallet security. Lose your seed phrase, your funds are gone. Get phished, you’re on your own.

That’s why many traders prefer BitMEX Copy Trading—you get Hyperliquid strategy exposure with BitMEX’s security infrastructure and customer support.

Does Hyperliquid require KYC?

No. You connect a wallet and trade. No ID upload, no selfie, no proof of address.

The trade-off: If you’re hacked or make a mistake, there’s no support line to call. With BitMEX Copy Trading, you get Hyperliquid strategies without sacrificing customer support.

What countries can use Hyperliquid?

Officially: Hyperliquid restricts certain regions like US users. In practice: There’s no KYC, so enforcement is difficult.

Using a VPN to access Hyperliquid might violate their ToS and potentially US law, depending on regulatory evolution.

The compliant alternative: BitMEX Hyperliquid Copy Trading lets you access the same strategies through a regulated platform. You trade on BitMEX, copying traders who happen to be on Hyperliquid.