Author: CoinW Research Institute

Recently, Hyperliquid has once again become the focus of market attention. On the one hand, according to on-chain data, large-scale withdrawals of funds have occurred from market-making addresses related to Windemute and Auros Global on the Hyperliquid platform, involving a maximum amount of nearly $100 million. On the other hand, traditional exchanges such as CME and ICE have also begun to push US regulators to pay attention to Hyperliquid, especially regarding the price discovery and regulatory boundaries issues brought about by perpetual contracts for traditional assets such as crude oil, stock indices, and pre-IPO.

In the past, the market's understanding of Hyperliquid focused more on its on-chain order book, exceptional trading experience, and Perp DEX's market share expansion. However, as mainstream market makers began to reduce their exposure and traditional exchanges started to exert public pressure, Hyperliquid's narrative has changed. It is no longer just a crypto-native perpetual trading platform, but is transforming into a 24/7 on-chain price discovery system covering both crypto and traditional assets.

In the following article, CoinW Research Institute will take the changes in addresses related to Windtermute and Auros Global as a starting point, and combine Hyperliquid's current transaction data with the background of CME and ICE promoting regulation, to analyze the liquidity pressure, growth logic and institutional risks that Hyperliquid is currently facing, and further explore where this on-chain perpetual giant may go in the future.

I. Two major market makers withdraw funds, putting Hyperliquid's liquidity to the test.

The core of this incident stems from Hyperinsight's monitoring of Hyperliquid's institutional liquidity provider addresses. According to Lookonchain's disclosure on May 18, amidst recent market volatility, two major institutional liquidity provider addresses on the Hyperliquid platform simultaneously experienced large-scale withdrawals, estimated to total close to $100 million.

Among these developments, Auros Global's associated LP addresses liquidated all their perpetual positions on the Hyperliquid platform within a short period and transferred approximately $6 million to Binance. Previously, this address had provided liquidity for approximately 175 tokens on the platform, with BTC-related liquidity alone reaching approximately $45 million at one point. Simultaneously, Wintertermute's associated addresses also significantly reduced their market-making exposure on Hyperliquid. Comparing this to previous data, Hyperinsight's liquidity provision for BTC and ETH decreased by approximately 90%, from approximately $40 million to approximately $4 million.

However, it should be noted that the addresses mentioned here, namely Wintertermute and AurosGlobal, are tagged addresses marked by third-party monitoring agencies such as Hyperinsight and Lookonchain, and are not confirmed by official announcements from the two companies.

Wintermute tag address: 0xecb63caa47c7c4e77f60f1ce858cf28dc2b82b00

Auros Global tag address: 0x023a3d058020fb76cca98f01b3c48c8938a22355

Further data from Coinglass and other sources indicates that as of May 19th, the perpetual account value of Wintertermute-tagged addresses was approximately $54.65 million, with a perpetual notional position of approximately $64.33 million and 114 remaining perpetual positions. Auros-tagged addresses show a more pronounced trend, with zero perpetual notional positions and a perpetual account value of approximately $898,000.

Source：https://www.coinglass.com/hyperliquid/0xecb63caa47c7c4e77f60f1ce858cf28dc2b82b00

Therefore, this event cannot be simply interpreted as "the two major market makers completely withdrawing from Hyperliquid." More accurately, the Auros-tagged address is closer to exiting its perpetual market-making exposure, while the Wintermute-tagged address is still participating in trading, although its risk budget, inventory structure, and quote depth may have changed. This distinction is crucial. If both institutions were to completely withdraw simultaneously, it would mean that professional market-making capital is beginning to reassess Hyperliquid's risk-reward ratio.

II. Liquidity in mainstream cryptocurrencies has not disappeared, but its absorption capacity is weakening.

However, in the crypto market, market maker withdrawals often don't immediately reflect in price charts or widen spreads. Especially with mainstream assets like BTC and ETH, even if some institutional limited partners (LPs) reduce their quotes, other traders, arbitrage bots, and platform liquidity mechanisms may still maintain tight first-tier spreads. Therefore, users may not immediately perceive a decrease in liquidity during daily trading. But this doesn't mean the impact is nonexistent. The real changes often occur in order book depth, impact costs, and the ability to recover from extreme market conditions.

Market makers play a role beyond simply providing bid and ask prices; they offer short-term inventory buffers during periods of unilateral market volatility. When large buy or sell orders or continuous liquidations occur, the amount of orders that leading market makers are willing to place on both sides of the order book determines whether prices can be absorbed smoothly in a short period. If this institutional capital withdraws, even if trading is smooth under normal circumstances, the order book is more prone to amplified slippage, price jumps, and chain reactions of liquidations once a stressful market emerges.

Hyperliquid's current platform-level trading data remains impressive. According to Coinglass data, as of May 19, 2026, the platform has launched 230 perpetual contract markets, with a 24-hour notional perpetual contract trading volume of approximately $5.2 billion and open interest of approximately $6.26 billion. BTC, ETH, and HYPE remain the main traded instruments. On the surface, Hyperliquid remains one of the most liquid perpetual contract platforms currently available on-chain.

Source：https://www.coinglass.com/exchanges/Hyperliquid

However, it's important to note that total trading volume and actual liquidity are not the same thing. Trading volume reflects how many transactions have occurred in the market, while liquidity reflects how many transactions can be absorbed at a low cost in the future. The former can be amplified by volatility, leverage, and high-frequency trading, while the latter depends more on market maker inventory, funding costs, and risk appetite.

Therefore, the real concern regarding this withdrawal of market makers is not whether Hyperliquid's trading volume will decline sharply in the short term, but rather the changing liquidity structure. Previously, Hyperliquid relied on its excellent product experience and institutional LP support to achieve trading depth approaching that of centralized exchanges. However, when core LPs actively reduce their market-making exposure to mainstream assets such as BTC and ETH, it indicates that the platform's liquidity is not entirely endogenous, but still relies on continuous support from external professional capital.

This also means that while Hyperliquid is an on-chain trading platform, its underlying liquidity logic is not entirely decentralized. The order book model still requires professional market makers to bear inventory risk, rather than relying primarily on passive liquidity pools like AMMs. When market makers' risk appetite declines, the platform may still appear to maintain high trading volume, but its vulnerability in extreme market conditions will be amplified again.

III. Hyperliquid's growth is no longer just about crypto-based perpetual growth.

From a purely crypto-native perspective, Hyperliquid's success is not difficult to understand. Based on an on-chain order book, it provides a trading experience close to that of centralized exchanges, while simultaneously constructing a valuation logic for exchange-traded assets through HYPE buybacks, fee capture, and ecosystem expansion. For a considerable period, the market's core understanding of Hyperliquid was that of an "on-chain Binance" or an "on-chain Perp DEX."

However, Hyperliquid is no longer just a perpetual cryptocurrency trading platform; it's entering the traditional asset trading arena through its unique mechanisms. Perpetual contracts for traditional assets like crude oil and silver are starting to rank high in trading volume on the platform, even occupying prominent positions in the top ten at times. This is crucial. One of Hyperliquid's truly imaginative aspects might not be simply moving BTC and ETH perpetual contracts onto the blockchain, but rather transforming the "market closure time" of traditional markets into tradable assets.

Traditional financial markets do not operate 24/7. Exchanges like CME and ICE may be closed on weekends, holidays, and during sudden geopolitical events. However, risk itself does not cease simply because exchanges are closed. Wars, sanctions, oil pipeline disruptions, central bank statements, and political events can all occur when traditional markets are closed. At such times, the market still needs a place to express expectations, hedge risks, and establish price benchmarks.

Hyperliquid found a new growth opportunity in this gap. While traditional markets were closed during geopolitical conflicts between the US and Iran, WTI crude oil perpetual contracts on Hyperliquid could still be traded in real time, reflecting price shocks in advance before traditional markets reopened.

This means that Hyperliquid's narrative may have expanded from "crypto asset trading" to "continuous pricing of global risks." It is not just an on-chain casino, nor just another Perp DEX, but is attempting to become a price discovery layer during traditional market closures.

From this perspective, Hyperliquid's value doesn't solely stem from its decentralized philosophy, but rather from its practicality. It remains open when traditional markets close; it provides a platform for immediate price expression when macroeconomic risks cannot wait until the next trading day. This demand is real and explains the rapid growth of traditional asset trading on Hyperliquid.

IV. From crude oil to SpaceX, Hyperliquid is expanding its business scope.

Hyperliquid's rapid expansion into traditional asset trading is primarily due to its HIP-3 mechanism. According to official documentation, HIP-3 allows deployers to create new perpetual contract markets by staking a certain amount of HYPE. Deployers can define market parameters, oracle sources, leverage limits, and settlement rules when necessary.

This mechanism is crucial for the platform's growth. It essentially opens up the ability to list new trading pairs from the centralized exchange's internal team to external market deployers. As long as someone is willing to bear the costs and provide the market design, Hyperliquid can theoretically scale rapidly to more asset classes. This allows it to gradually transform from a crypto perpetual platform into a scalable on-chain derivatives platform.

Meanwhile, Hyperliquid's latest offering, HIP-4, further expands its product boundaries. Unlike HIP-3, which primarily focused on perpetual contracts, HIP-4 leans more towards outcome trading, namely prediction markets and event-driven contracts. These contracts typically price and settle based on the outcome of a real-world event, such as whether a price reaches a certain range or whether a macroeconomic event occurs. In other words, while HIP-3 allowed Hyperliquid to expand into more perpetual assets, HIP-4 further propels it into the realm of prediction markets and event trading.

But this is precisely where the problem lies. Perpetual contracts are not simple spot trading, especially as the underlying assets expand from cryptocurrencies to real-world assets such as crude oil, stocks, and pre-IPO assets, the issues the platform faces become more complex. Furthermore, with HIP-4's further introduction of prediction markets and event contracts, the regulatory scope that Hyperliquid encounters is no longer limited to derivatives trading itself, but may extend to more sensitive areas such as event contracts, betting, election predictions, sports results, and macro event trading.

More notably, Hyperliquid's asset expansion is no longer limited to traditional macro assets such as crude oil, gold, and stock indices. Hyperliquid is extending on-chain price discovery from crypto assets and commodities to pre-IPO equity and IPO pricing expectations. On May 17, trade.xyz launched the SpaceX Pre-IPO perpetual contract SPCX-USDC based on the Hyperliquid HIP-3 framework, with an initial reference price of approximately $150, corresponding to a fully diluted valuation of approximately $1.78 trillion. On May 18, the contract saw rapid volume growth in market trading, with the price rising to over $216 at one point, briefly pushing the implied valuation above $2.5 trillion.

However, this further extends the regulatory scope of Hyperliquid. Oil perpetual contracts primarily touch upon CFTC and commodity regulations, stock index perpetual contracts touch upon securities index and derivatives regulations, and pre-IPO perpetual contracts may touch upon private equity, securities issuance, information disclosure, and accredited investor regulations. Furthermore, prediction markets and event contracts represented by HIP-4 may further touch upon issues such as event contract regulation, gambling regulation, and real-world outcome adjudication.

In other words, the more successful Hyperliquid's growth, the more complex the regulatory issues it faces become. It is no longer just a permissionless trading platform, but is transforming into a market experiment that brings the most difficult, challenging, and controversial aspect of traditional finance—price discovery—onto the blockchain.

From a product perspective, this innovation is extremely attractive. Previously, ordinary traders had virtually no access to price discovery for unlisted companies like SpaceX, relying instead on secondary market rumors, private equity valuations, or indirect market decisions after an IPO. The emergence of on-chain pre-IPO perpetual pricing allows the market to continuously price unlisted assets at an earlier stage. Furthermore, if HIP-4 develops further, it could also allow users to express their judgments on macroeconomic events, market outcomes, and real-world events through prediction markets.

From a regulatory perspective, this also means Hyperliquid has entered a more sensitive area. Pre-IPO assets are not simply crypto assets; their prices often involve information asymmetry, private financing, accredited investor restrictions, and securities issuance rules. Prediction markets are not ordinary trading instruments either; their outcome determination, event design, and participant scope have long been subject to regulatory controversy. Once these on-chain prices are widely referenced by the market, they will no longer be merely speculative contracts but could become external price signals influencing private market expectations, macroeconomic event assessments, and even the pricing of real-world assets.

V. The pressure exerted by CME and ICE is essentially a struggle over price discovery rights.

Meanwhile, CME and ICE are pushing the CFTC and US lawmakers to strengthen oversight of Hyperliquid. Their concerns focus on several areas: Hyperliquid's current anonymous trading model could lead to market manipulation and sanctions evasion; the rapidly growing crypto and commodity-related trading on the platform could impact price discovery in key markets, including crude oil; and without customer identification and transaction monitoring, regulators would struggle to verify participant identities and trading motives. On the surface, this appears to be traditional exchanges questioning the regulation of on-chain derivatives platforms. However, at a deeper level, it's more like a battle for price discovery rights.

CME and ICE have long controlled crucial trading and clearing infrastructure for global commodities, stock indices, and interest rate derivatives. Their value stems not only from order matching but also from benchmark prices, liquidity networks, clearing credit, and regulatory approval. When Hyperliquid began generating on-chain prices for crude oil, stock indices, pre-IPO contracts, and even event contracts during traditional market closures, it effectively challenged the very core competitive advantage of traditional exchanges.

This is why regulatory pressure on Hyperliquid has intensified rapidly following the growth of traditional asset trading. If it were merely a crypto-native Perp DEX, traditional exchanges might not have paid such attention. However, as it begins to become an instant trading venue for weekend oil prices, geopolitical conflicts, stock index expectations, and private asset valuations, the question is no longer simply "whether a DeFi project is compliant," but rather "who has the right to generate prices when global markets are closed."

Hyperliquid's response is also noteworthy. In its comment document submitted to the CFTC, it emphasized that on-chain transaction records are publicly available in real time, and all orders, trades, and settlements are traceable, thus theoretically offering higher transparency than traditional markets. Furthermore, 24-hour trading can reduce opening gaps in traditional markets, allowing the market to reflect information more continuously.

This response is not without merit. On-chain transparency can indeed reduce some of the risks of opaque transactions and provide complete data for post-incident investigations. However, transparency is not the same as compliance. Regulators are concerned not only with whether transactions can be seen, but also with whether participants are identifiable, whether abnormal transactions can be intercepted, whether sanctioned entities are excluded, whether market deployers fulfill their obligations, and who is responsible for maintaining market order in systemic events.

More notably, CME itself is accelerating the development of 24/7 trading capabilities. CME officially states that its crypto futures and options plan to enter 24/7 trading mode on May 29, 2026; furthermore, CME plans to launch products such as Nasdaq CME Crypto Index Futures. In other words, traditional exchanges are not against 24/7 trading itself, but rather, while incorporating this capability into a regulatory framework, they are requiring on-chain competitors to bear similar compliance costs.

Source：https://www.cmegroup.com/markets/cryptocurrencies/24-7-crypto-trading.html

Therefore, the conflict between Hyperliquid and traditional exchanges is not a simple clash between old and new finance, but rather a collision of two market orders. One order emphasizes openness, transparency, 24-hour operation, and global licensee-free access; the other emphasizes entry requirements, monitoring, clearing, licensing, and responsible entities. The former is more efficient, while the latter incurs heavier institutional costs. However, when trading targets include crude oil, stock indices, pre-IPO assets, and prediction markets, these institutional costs are difficult to circumvent in the long run.

VI. Deeper Thinking

Is Hyperliquid truly the next-generation exchange for on-chain finance, or simply a rapid expansion beyond regulatory boundaries? Short-term trading data suggests it remains in a strong cycle; trading volume, open interest, HYPE (Hyper-Investment Exchange) attention, and expansion in traditional asset trading all indicate genuine market demand. However, viewed over a longer period, the recent withdrawal of market makers and pressure from CME and ICE may be prematurely exposing a deeper problem: while on-chain trading infrastructure is entering the heart of traditional finance, the corresponding accountability structure has not matured accordingly.

6.1 From Crypto Exchanges to Macro Price Discovery Layer

Hyperliquid's early competitive focus was on achieving a better on-chain perpetual trading experience. It addressed a problem within the crypto market: how users could obtain low latency, high liquidity, and a wide range of trading pairs without relying on centralized exchanges.

But with the advancement of HIP-3 and HIP-4, Hyperliquid is entering another phase. It's no longer just serving crypto assets, but has begun to serve macroeconomic risks, private equity expectations, and real-world event outcomes. Oil prices, stock market volatility, geopolitical events, pre-IPO valuations, prediction markets, and traditional market closing windows can all become sources of its growth.

This is also its most imaginative aspect. The time structure of traditional financial markets is not adapted to the current speed of information dissemination. Information spreads in real time, risks occur in real time, but official trading venues for many assets are not open in real time. Hyperliquid provides an alternative outlet, allowing market participants to continue expressing their expectations while traditional markets are closed.

But this also means that it is no longer just a product issue, but a market order issue. If a platform only allows users to trade MEME or crypto perpetual tokens, its influence is still mainly within the cryptocurrency circle; but if it begins to affect oil prices, stock indices, and macroeconomic asset expectations, it will naturally come into the view of regulators and traditional exchanges.

6.2 The Liquidity Illusion Behind Scale Growth

Hyperliquid's current data remains impressive, but the larger the platform, the more wary one should be of the liquidity illusion. Increased trading volume does not necessarily indicate a healthier market, especially in highly leveraged perpetual markets where trading volume is often amplified by volatility, liquidations, high-frequency arbitrage, and repeated turnover.

To some extent, liquidity withdrawal doesn't necessarily mean institutions are becoming pessimistic. For market makers, temporarily reducing exposure may be to reserve some room for more cost-effective liquidity deployments in the future. However, the real key question is whether there will still be enough professional capital willing to bear the risk of counterparties when a one-sided market trend emerges. The changes in Wintermute and Auros-related addresses indicate that institutional market makers have begun to reassess this issue. They don't necessarily disapprove of Hyperliquid's product capabilities, but rather have higher requirements for future risk compensation.

When regulatory uncertainty rises, traditional asset trading becomes more sensitive, and platforms are publicly scrutinized by CME and ICE, market makers need to consider more than just trading profits. They also need to consider issues such as address exposure, compliance inquiries, unexpected exits, and tail events. Market-making capital naturally pursues profits but also has an extreme aversion to unpriceable risks. Once a certain type of risk cannot be effectively measured by a model, the most direct reaction is to reduce positions, cancel orders, and decrease quote depth.

Therefore, the core issue in this incident is not whether Hyperliquid's liquidity will collapse immediately, but rather that its liquidity costs may begin to rise. If Hyperliquid wants to maintain its liquidity level and continue to provide market makers with a high-yield, high-growth, and low-friction environment, it may need to offer them higher returns, clearer rules, or lower institutional risks. Otherwise, the larger the trading volume on the platform, the more pronounced the liquidity gap may become under extreme market conditions.

6.3 Restructuring of Responsibilities in Open Markets

Hyperliquid's appeal lies in its lowering of the barriers to market creation and asset trading. However, as market creation becomes more open, the boundaries of responsibility also become blurred.

In traditional exchanges, the launch of a new futures contract typically involves rigorous product design, regulatory review, risk control models, clearing arrangements, and market monitoring. However, in an on-chain environment, the responsibilities among market deployers, oracles, market makers, protocols, and users are fragmented, and no single entity may bear full responsibility for the ultimate risk.

This might be acceptable in native crypto assets, where participants generally accept high risk and assume full responsibility. However, the situation changes in traditional assets and prediction markets. Crude oil, stock indices, and pre-IPO prices have externalities, affecting not only speculators but also potential expectations in the real market; while event contracts and prediction markets involve issues such as outcome adjudication, participant scope, and pricing of real-world events. When on-chain prices begin to be observed, referenced, or arbitraged externally, regulators will demand a clearer chain of responsibility.

This is an issue that Hyperliquid cannot avoid in the future. It can continue to emphasize on-chain transparency and the efficiency improvement of 24-hour transactions, but if it cannot answer the questions of "who is responsible for market quality, who is responsible for abnormal transactions, who is responsible for access review, and who is responsible for liquidating extreme risks," then its traditional asset expansion will always remain in a gray area.

VII. Summary

The controversy surrounding Hyperliquid doesn't mean the story is over; rather, it shows that it has truly entered the purview of the traditional financial system. In the past, market discussions about Hyperliquid focused more on whether an on-chain perpetual exchange could replicate the efficiency of centralized exchanges. Now, the market is discussing whether a permissionless on-chain market is qualified to participate in price discovery for crude oil, stock indices, private equity, and even real-world events.

This is also the most noteworthy aspect of this round of market maker withdrawals. The changes in the addresses associated with Wintermute and Auros do not necessarily indicate a rejection of Hyperliquid's product capabilities. On the contrary, professional market makers often have the clearest understanding of where liquidity, trading volume, and profits lie. What they are truly repricing is the added regulatory, reputational, and tail-exit risks that come with Hyperliquid's transition from a crypto-native exchange to a global price discovery layer.

From this perspective, Hyperliquid's biggest challenge in the future may not be whether trading volume can continue to grow, but whether the growth itself will change its risk nature. If the growth mainly comes from native crypto assets such as BTC, ETH, and SOL, it will remain a highly efficient on-chain trading platform; however, if the growth increasingly comes from real-world assets such as crude oil, stock indices, SpaceX pre-IPO, and prediction markets, it must answer the long-standing questions faced by traditional finance: who is qualified to create markets, who is responsible for price quality, who bears the responsibility for abnormal transactions, and who maintains order in extreme market conditions.

Therefore, Hyperliquid's core challenge going forward is not a simple conflict between decentralization and regulation, but rather a rebalancing between open price discovery and institutionalized accountability. Its greatest value lies in proving that global risks can be traded in real time on-chain; its greatest danger, however, is that once these prices begin to be referenced by external markets, it cannot remain forever within the narrative of "code is law."

Hyperliquid is entering a more challenging phase. Previously, the market focused on whether its on-chain order book met demands in terms of efficiency, depth, and user experience. Now, the real test lies in whether it can maintain openness and on-chain characteristics while introducing clearer identity, compliance, and accountability mechanisms to meet the market structure and regulatory requirements of traditional finance. Whether it can successfully complete this transformation will determine whether Hyperliquid ultimately remains merely a leader in the Perp DEX market or becomes a core variable in the next generation of financial market structure.