Liquid Hyperliquidity Provider (hHLP)

The Hyperliquid Provider Vault (HLP) is a decentralized liquidity pool within Hyperliquid that allows users to deposit assets and collectively provide liquidity for trading. Participants earn yield from trading fees and share both profits and losses generated by trading activities.

Why make it available as collateral? - it enables capital efficiency by allowing depositors to borrow against their liquidity positions, maximizing their flexibility without needing to withdraw assets from the vault.

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How to make it available as collateral?

Users deposit USDC into the vault, which then transfers it to Hyperliquid L1 exchange, where it's deposited into the HLP vault.

Vault shares (represented as ERC20 tokens) can then be used as collateral in Isolated Pools.

To redeem the underlying USDC, shares are burned, a proportional portion of the vault position is withdrawn and USDC is transferred back to the Liquid HLP vault where it can be claimed.

sharePrice = totalHlpDepositBalance / totalShares For more information on the liquid HLP vault: https://x.com/hyperlendx/status/1866200186915266716

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Example;

Imagine you deposit $10,000 USDC into the Hyperliquid Provider Vault (HLP). In return, you receive tokenized shares representing your vault position (hHLP tokens). Currently, HLP offers an attractive yield of approximately 1.75% per month (~23% annually), coupled with low volatility (annualized volatility of 17.89%) and strong risk-adjusted returns (Sharpe ratio of 2.89 lifetime, recently as high as 5.2).

Because HLP shares are collateralizable, you can borrow and loop your position multiple times.

• Without loop: Deposit into HLP → total exposure = $10,000 (Earning $175/month or $2,100/year)

• First loop: Borrow $5,000 (50% LTV), deposit back into HLP → total exposure = $15,000 (Earning $262.50/month or $3,150/year)

• Second loop: Borrow another $2,500 (50% of the $5,000), deposit again → total exposure = $17,500 (Earning $306/month or $3,672/year)

• Third loop: Borrow another $1,250 → total exposure = $18,750; (Earning $328/month or $3,936/year)

• Fourth loop: Borrow another $625 → total exposure = $19,375 (Earning $339/month or $4,068/year)

• Fifth loop: Borrow another $312.50 → total exposure = $19,687.50 (Earning $344/month or $4,128/year)

These yield estimates are based on the historical performance analysis detailed here.

Please be aware that leveraging your position through looping inherently introduces additional risks, including increased exposure to liquidation risks if market conditions shift. Always manage your risk carefully and monitor positions closely when employing leveraged strategies.