Understanding the ADL Mechanism and Community Concerns
Hyperliquid co-founder Jeff Yan has publicly refuted accusations that the Automatic Liquidation (ADL) mechanism unfairly transfers profits and losses to Hyperliquidity Providers (HLPs). Yan asserts that the mechanism is designed to treat users and providers symmetrically, aiming to protect user and systemic stability. He further clarified that in prior events, the ADL mechanism had generated user profits.
This clarification from Jeff Yan is intended to address concerns within the community and to maintain trust in Hyperliquid's system. The perceived fairness and transparency of the protocol's mechanics significantly impact how traders view and interact with the platform.
ADL Allegations and Jeff Yan's Defense
Hyperliquid co-founder Jeff Yan has confronted allegations suggesting the Automatic Liquidation (ADL) feature unfairly impacts Hyperliquidity Providers (HLPs). This public denial addresses concerns around operational transparency and highlights how ADL's design supports trader outcomes without favoring liquidity providers. Jeff's statement emerges amid a backdrop of scrutinized exchange mechanics. The refuted claims were centered on the idea that ADL disproportionately influences financial positions of protocol participants. Hyperliquid has emphasized that ADL's structure enables balanced treatment across stakeholders and aligns with precedents seen in centralized exchanges. Jeff's remarks aid in clarifying confusion about the protocol's revenue structure and stakeholder treatment.
Jeff's assertions have prompted a multitude of reactions from industry leaders. Tarun Chitra described Hyperliquid’s ADL rules as “textbook aggressive,” highlighting potential tensions in decentralized trading dynamics. Conversely, Jeff insists the design offers net benefits for traders and mitigates systemic risk.
The ADL mechanism treats users and HLP symmetrically and does not ‘destroy’ hundreds of millions in revenue.
Price Volatility and Market Reactions
In past events, Hyperliquid's ADL mechanism has reportedly generated substantial net profits for traders, showcasing a unique balance between protocol efficiency and user benefits.
As of December 10, 2025, Hyperliquid's native token HYPE trades at $28.22, reflecting a market cap of $9.50 billion. The 24-hour trading volume stands at $402 million, down 3.56% over the period. Over the past 90 days, HYPE has witnessed a notable decline of 49.11%, indicating significant volatility and market challenges.
Analysts note that Hyperliquid's ADL mechanism’s structure parallels those of major exchanges, aiming for systemic stability. They expect trader-focused protocols to remain appealing amidst growing regulatory attention on liquidation procedures.