Hyperliquid has firmly denied accusations suggesting its protocol is under-collateralized, asserting that its on-chain assets exceed $4.3 billion and that all user funds are diligently managed.

The statement follows a widely circulated report that raised doubts about the financial soundness and transparency of one of the largest platforms for on-chain derivatives, which holds over $4.1 billion in total value locked (TVL) as estimated by DefiLlama.

Detailed Response to Allegations

Hyperliquid’s communication, shared on X on December 22, clarified that the insolvency claims were based on an accounting oversight rather than an authentic deficit. The protocol explained that the author of the controversial article neglected to tally the native HyperEVM USDC balances that operate alongside the Arbitrum bridge. When included, Hyperliquid stated that the total USDC amount on HyperCore reached $4.351 billion.

“The Hyperliquid blockchain state is fully and verifiably solvent,” the team stated, adding that “every dollar is accounted for” and highlighting that stakeholders can independently validate balances by running a node and reviewing on-chain records. The protocol also dismissed accusations of volume manipulation, clarifying that cited functions are exclusive to the testnet and utilized for stress-testing the fee logic.

“Testnet-only features that enable more rigorous testing of edge cases do not undermine the chain’s integrity,” they wrote.

Additionally, they noted that such code paths cannot be accessed on the mainnet and will be entirely eliminated to prevent any misunderstanding. Other accusations have centered on alleged “god mode” privileges, oracle control vulnerabilities, liquidation cartels, concealed lending activities, and governance capabilities to freeze the chain.

However, Hyperliquid argues that these points indicate misconceptions about its architecture. It explained that CoreWriter lacks the authority to create tokens or transfer user funds without consent, that prices for validator-operated perps derive from a mean of major exchanges, and that liquidation support is organized by a community-owned liquidity pool that is publicly accessible.

“Every order, trade, and liquidation is available in real time during execution,” the team concluded.

They further contended that the decentralized exchange’s fully on-chain framework provides more robust assurances than competing perps platforms that use centralized sequencers.

Market Position During Supply Developments

Hyperliquid’s defense of its financial health comes at a tumultuous time for its native HYPE token. After reaching a peak near $59 in mid-September, the token has seen a sharp decrease, trading at around $25 at the time of writing, marking a roughly 24% decline over the previous month and approximately 60% from its all-time high.

Current supply-side developments include a proposal from the Hyper Foundation for a validator vote to permanently burn about 37 million HYPE tokens, accounting for about 10% of the circulating supply held in its Assistance Fund.

If the proposal gains approval, it would remove nearly $1 billion worth of tokens from circulation. Validators are expected to make a decision by December 24. However, this deflationary action coincides with an impending token unlock of 9.92 million HYPE scheduled for December 29, which could exacerbate selling pressure.