Hyperliquid's flagship liquidity vault, HLP, closed its first full operational year with a 21.4% net return on deposited capital after fees. The number is a strong outcome by almost any DeFi yield benchmark, and it is reshaping the conversation about what passive participation in on-chain market-making can earn.
It also surfaces structural questions about the vault that haven't been fully tested in stress.
How HLP Generates Yield
HLP is a depositor-funded vault that runs the on-exchange market-making strategy for Hyperliquid's perpetual-futures markets. Depositors earn a share of three revenue streams: maker rebates and the funding-rate edge from holding positions on the right side of the funding flow, the liquidation cascade revenue when underwater positions are closed against the vault, and the direct fee share from the protocol's overall trading volume.
In a year of relatively healthy crypto volatility — the kind that produces consistent funding-rate spreads and a steady liquidation cadence — the strategy compounds well. The vault was deposited into through the year by a mix of yield-seeking individuals, DAO treasuries, and a smaller number of sophisticated allocators using HLP as their delegated DeFi market-making exposure.
The Comparison Set
A 21% net yield in DeFi is a number that requires context. Aave depositors over the same period earned roughly 4 to 6% in stablecoin pools depending on conditions. Morpho's curator vaults ranged from 5% to high-single-digits for RWA vaults and into the low teens for the more aggressive crypto-native strategies. Pendle's principal-token strategies cleared 8 to 14% depending on the underlying.
Twenty-one percent is in the upper tail of the yield distribution available in DeFi for non-leveraged, non-token-incentive yield. The risk profile, however, is structurally different: HLP is not a credit market but a market-making exposure, and its returns derive from being on the right side of order flow rather than from interest-rate spreads.
The closer comparison is probably to Uniswap V4 LP positions in concentrated-liquidity pools or to dYdX's old liquidity-provider rewards model. Both of those have historically delivered comparable headline returns in good years and meaningful drawdowns in bad ones.
The Concentration Question
HLP's first-year performance was strong in part because the vault has been running through favorable conditions. Crypto market volatility through 2025 and into early 2026 has been the kind that generates consistent funding-rate spreads. There has not yet been a coordinated liquidity event that tests how HLP behaves when funding rates compress simultaneously across major venues, when liquidation cascades go against vault positioning, and when the vault would need to deleverage faster than it can.
The depositor base has also concentrated as the vault has grown. The top 50 depositors hold the majority of TVL, and a meaningful portion of that is held by addresses that receive treasury delegations from large protocols. If those large depositors needed to exit simultaneously — for treasury-management reasons unrelated to HLP performance — the vault's withdrawal queue would be tested in ways it hasn't been so far.
Hyperliquid has implemented withdrawal-queue mechanics that are designed for orderly exits, but the system has never been stressed at the scale that would matter. The first time a major depositor unwinds quickly will be informative.
What HLP's Performance Means for the Perps DEX Competition
Hyperliquid has spent the past two years gaining share against centralized perpetual-futures venues — particularly Binance, Bybit, and OKX — and against other DeFi perp DEXes including dYdX and GMX. The HLP vault has been a meaningful component of the share-gain story because it provides the depth of resting liquidity that makes the venue tradable at institutional sizes.
If HLP's yield holds up, the vault will continue to attract deposits, the deposits will fund deeper liquidity, the deeper liquidity will attract more trading, and the trading will generate more vault yield. That is a flywheel worth understanding because it explains how a DeFi venue can compete on liquidity with centralized exchanges that have much larger balance sheets.
If HLP's yield compresses materially — through a return of competitive funding rates, lower volatility, or concentration-driven withdrawals — the flywheel goes the other way. Less depth, less trading, less yield, less capital. Whether that downside scenario emerges over the next year is the central question for Hyperliquid's competitive trajectory.
The Read-Through
A 21% first-year return on a passive DeFi market-making vault is a notable outcome and validates the model that Hyperliquid built around HLP. It also raises the implicit benchmark for what depositors will expect from the next iteration of similar products on competing venues.
The structural risks — concentration, untested stress dynamics, dependence on continued favorable market conditions — are real. None of them have been triggered yet, and depositors who have stayed in for the full year are sitting on strong returns. The question for the next year is whether the model proves robust to conditions that haven't yet appeared, or whether the favorable starting environment was a meaningful component of the headline number.
