Hyperliquid Funding Arb
Overview
The Hyperliquid Funding Arb vault earns yield by capturing funding rate imbalances in perpetual futures markets on Hyperliquid. The strategy holds offsetting spot and perpetual positions to remain delta-neutral. Yield is generated by the structural demand for leverage from perpetual market participants.
A separate 10% allocation to the Hyperliquidity Provider (HLP) vault diversifies yield sources and provides additional return stability during periods of extreme bearish market volatility.
Live since June 11, 2025
How It Works
The vault takes simultaneous long positions in spot and short positions in perpetual futures on the same asset, targeting a zero net directional exposure. Funding payments flow from the short perpetual position to the vault when funding rates are positive, which is the case when the market is net long (the structural majority of market conditions).
Example:
Long 1 HYPE in spot → delta = +1
Short 1 HYPE in perpetual futures → delta = −1
Net delta = 0
Funding payments from the short perp position accrue to the vault
The system rebalances positions automatically to maintain delta-neutrality as prices move and as the asset mix shifts.
HLP allocation: 10% of USDC reserves are allocated to Hyperliquid's native HLP vault, which earns yield from Hyperliquid's market-making activity, liquidation fees, and platform fees. .
Yield Sources
Perpetual funding payments — paid by leveraged long participants to short holders
Spot-perp price inefficiencies — additional spread captured when spot and perpetual prices diverge
HLP returns — market-making income, liquidation fees, and platform fees
Risk Factors
Funding rate risk — Rates can turn negative, in which case the vault pays funding rather than receives it. Positions are adjusted when the net yield no longer justifies the cost.
HLP risk — During severe market dislocations, HLP can incur losses from market-making exposure. The 10% allocation cap limits the impact on overall vault performance.
Liquidation risk — The vault operates with low leverage. Margin health is monitored continuously with automated rebalancing before liquidation thresholds are approached.
Smart contract risk
Custody & Security
Vault assets operate under Neutral Strategy Vaults standard walled garden framework: multi-party approvals for all fund movements, whitelisted withdrawal addresses only, and no single key holder able to authorise transactions unilaterally. Full details: Security.
Last updated