Vaults on Hyperliquid: A Smarter Way to Manage Capital?
Hyperliquid is carving out its place as a top decentralized exchange (DEX), offering serious tools and flexibility that are attracting traders of all sizes. In fact, it’s become a great choice even for those with significant capital, as highlighted in our previous article, Whales on Hyperliquid.
In this piece, we’ll examine another piece of the Hyperliquid puzzle: capital management through Hyperliquid’s Vaults. Vaults are a feature designed to help users earn profits in a flexible, automated way, whether you’re an individual, part of a DAO, or managing a protocol.
With up-to-date data from September 10th, 2024, we’ll explore how Vaults work, why they’re useful, and the current state of user-created vaults. Specifically, we’ll focus on user-created vaults and their potential to provide passive returns as an alternative to the Hyperliquid Provider (HLP) and its currently faltering APR.
What are vaults?
Vaults on Hyperliquid are a clever way to manage capital more effectively. They function as native funds within the DEX, where traders can run strategies — whether short-term trades or long-term investments — while anyone else can deposit funds and let the Vault manager handle the work.
These Vaults come with built-in conveniences like automatic position adjustments when withdrawals happen, so everything stays balanced without manual effort.
As for who can create Vaults, it’s open to anyone — individual traders, DAOs, or protocols. And as an added incentive, the Vault owner earns 10% of the profits, making it an appealing option for skilled traders looking to attract deposits.
The Vault Landscape: Current Numbers and Trends
As of now, Hyperliquid boasts an impressive 3951 user-created Vaults. There was a significant surge in Vault creation at the beginning of 2024, reflecting growing interest in this feature.
Since then, the daily creation rate has stabilized between 10 and 20 Vaults, indicating a steady and sustained interest from the community.
However, not all of these Vaults are actively in use or open for new deposits. Here’s a snapshot of their current status:
In practical terms, this leaves us with approximately 1821 Vaults that are both open to deposits and actively managed.
This distribution highlights the dynamic nature of Vaults on Hyperliquid, with a substantial number of them being actively utilized while others are either inactive or not accepting new deposits.
Vaults TVL: Current Overview and Breakdown
Hyperliquid’s user-created Vaults currently hold nearly $12.5 million in total value locked (TVL).
While this is substantial, it’s still quite small compared to the Hyperliquid Provider (HLP), which boasts a massive $235 million in TVL. This means that HLP holds almost 19 times more deposits than all user-created Vaults combined.
Still, we can see from the chart below that while user-created Vaults have been accruing TVL since launch, the process has been quite volatile: from a high at $17m in March, the total value locked in funds has drastically diminished since then, reaching a low of almost $5m USD in August. Interestingly, we see an uptick in TVL in recent weeks back to $12.5m.
Here’s a more detailed look at the distribution of TVL across different Vault sizes:
As the data shows, most Vaults are on the smaller side, with a large majority holding less than $1,000. This reflects a concentration of lower-value Vaults, while only a few have substantial deposits.
Notably, this table excludes Vaults that are closed, focusing on those currently active and open for deposits.
It’s apparent that the community is still experimenting with the Vaults feature. The majority of Vaults hold relatively small amounts, suggesting that many users are testing various strategies and approaches.
As the feature continues to develop, we might see a shift toward larger and more refined Vaults as users gain more experience and confidence in their strategies.
Vaults & Performance
In this section, we’ll take a closer look at the performance of selected vaults. We used the following criteria in our selection:
- The vault must be open
- TVL must be above $50000
These criteria were chosen to select vaults in which a user could deposit at least a few thousands in capital. We gives us 20 vaults which fit our requirements, 13 with negative performance and 7 with positive performance.
While our selection is quite limited, a few characteristics stand out:
- Losing vaults seem to have a cap on ROI loss at around 10%, with 2 clear outliers
- Winning vaults show great outperformance compared to the market, with some reaching ROIs above 400%
This asymmetry between positive ROI and negative ROI is quite interesting and a potential explanation could be that vaults are actually being used as subaccounts, segregated from the main account, in order to take trades with high leverage.
Looking to the future
Through this article, we’ve explored several key aspects of Vaults on Hyperliquid:
- Native Fund Management: Vaults offer a native solution for fund management on Hyperliquid, complete with features that enhance the experience for managers and investors alike. They simplify tasks like automatic position resizing during withdrawals, adding a layer of convenience.
- Community Experimentation: There’s been a notable surge in Vault creation, with dozens of new Vaults popping up daily and the total value locked (TVL) in user-created Vaults currently experiencing an uptick. This indicates a vibrant and active community experimenting with different strategies.
- Limited Options: Despite the growth in TVL, there aren’t many standout user-created Vaults that could accommodate large inflows of user deposits
Vaults have the potential to become a significant feature on Hyperliquid. They simplify fund management with user-friendly tools, making them appealing to both experienced traders and newcomers. The recent decline in HLP yields might drive interest in user-created Vaults as viable alternatives.
However, for Vaults to truly take off, better discoverability is crucial. Improved visibility and access will help users find and evaluate Vaults more effectively, along with more robust statistics and performance metrics to guide their decisions.
About HyperScanner
HyperScanner is an analytics platform focused on the Hyperliquid Dex & accompanying HyperEVM. Investors, projects and traders are able to use Hyperscanner to discover investment opportunities, perform due diligence and build quality dApps using our digested data, upcoming API and dashboards.
Website: https://www.hyperscanner.app/
Twitter: https://x.com/hyper_scanner
