A single wallet on Hyperliquid currently holds a substantial long position valued at approximately $649.6 million in Ethereum (ETH), entailing 223,340 ETH that were acquired at an average price of $3,161.85. This position is facing a liquidation estimate set near $2,268.37.
As of the latest update, ETH is trading around $2,908.30, with the liquidation threshold approximately 22% below that price point. While this margin offers some protection against immediate liquidation, it remains vulnerable to rapid market fluctuations, which could escalate volatility.
To date, the position has experienced significant unrealized losses amounting to around $56.6 million, alongside an additional $6.79 million in funding costs. This amounts to a cushion of approximately $129.9 million before entering a forced closure scenario.
The same wallet was notably successful during the market’s downturn in October, generating over $100 million in profits by strategically engaging in two Bitcoin (BTC) short positions and an ETH long position. This resulted in combined profits of $101.6 million across trades that lasted from 12 to 190 hours.
This successful track record makes the current drawdown particularly noteworthy, not due to a lack of trading acumen, but rather because the sheer size of the position coupled with the mechanics of cross-margin liquidation on Hyperliquid could create ripple effects that extend beyond the individual account.
How Cross Margin Influences Liquidation Pricing
Hyperliquid’s cross-margin system means that the liquidation price for a position is not static; it fluctuates as collateral values change, as funding payments accumulate, and as unrealized profits or losses occur across various positions within the account.
According to the platform’s documentation, in a cross-margin context, the liquidation price is independent of the leverage setting. Consequently, altering the leverage reassigns collateral backing each position without impacting the maintenance margin threshold.
This dynamic is critical because the liquidation price on cross-margin positions acts as a moving target rather than a countdown. The wallet’s available margin of $129.9 million provides some leeway; however, the rapid shifts in funding rates for ETH perpetuals during volatile periods can threaten to reduce account equity, which may bring the liquidation price closer to the market price.
The Implications of Liquidations
On Hyperliquid, most liquidations are executed directly through the order book, meaning the forced closure of positions occurs within the perpetual market first — rather than selling off spot ETH.
The platform’s liquidation vault and HLP backstop cover trades that fall below maintenance margin thresholds. In extreme scenarios where market conditions worsen beyond the backstop’s capacity, Hyperliquid activates an auto-deleveraging mechanism to close out opposing positions to mitigate bad debt.
Typically, any spillover impacts the spot market indirectly. Arbitrageurs and market makers react to discrepancies between perpetual and spot prices, triggering a rapid acceleration of hedging flows and the widening of basis spreads as leveraged positions are unwound.
This sequence of reactions could intensify downward price pressure, especially if multiple large positions cluster around similar liquidation prices, potentially initiating cascade effects.
Hyperliquid adjusted its margin requirements following an incident in March 2025 when a significant $200 million ETH long liquidation led to a $4 million loss for the HLP backstop. Consequently, the platform now mandates a 20% minimum collateral requirement in certain situations, reinforcing its commitment to maintain overall system stability while acknowledging that backstop losses may still occur.
Identifying Areas of Leverage Concentration
CoinGlass liquidation heatmaps serve as a valuable tool in pinpointing where cascade risks are most concentrated. These heatmaps aggregate data from trading volume, leverage usage, and other relevant metrics to indicate potential zones where liquidations could coalesce if market prices hit specific thresholds.
It’s important to note that CoinGlass clearly states these maps are relative indicators, not definitive forecasts. The actual liquidation amounts may vary from what the heatmaps portray.
Recent data suggests notable leverage concentrations for ETH between $2,800 and $2,600, along with another cluster near $2,400. The liquidation threshold of $2,268 for the $649 million long position lies beneath these amplified leverage zones, implying it wouldn’t necessarily trigger in isolation.
However, should a wider deleveraging trend push ETH below the $2,400 threshold, that large position could be swept into the liquidation cascade.
The 22% buffer to liquidation shouldn’t be interpreted as indicative of an impending failure, but it does place the position within the historical volatility range of ETH prices. Notably, ETH has recorded multiple drawdowns exceeding 20% over the past two years, often coinciding with correlated sell-offs across both equity and cryptocurrency markets.
The wallet’s profitable trades in October were achieved by capitalizing on macroeconomic reversals and exiting positions before momentum shifted. In contrast, the current ETH long has been held long enough to incur considerable funding costs and mark-to-market losses. The trader now finds themselves reliant on a reversal in ETH prices to stave off further erosion of equity or avoid a margin call.
