Nearly 80% of HLP's funds lie in USDC, and Hyperliquid is preparing to start earning interest on this $150 million? After the next network upgrade, HLP will automatically transfer USDC that has not been used for market making to the HyperCore native lending market This may seem like just a capital adjustment, but behind it lies the changing role of HLP: It is no longer just a fund pool responsible for market making and clearing risks, but is gradually becoming a multi strategy treasury for automatic capital allocation First, let's talk about what HLP is. HLP is the official liquidity vault of Hyperliquid. After users deposit USDC, the system will allocate the funds to market making, clearing, and other trading strategies, and the profits and losses generated will be shared by the vault participants When the early Hyperliquid order book was not mature enough, HLP needed to provide buying and selling quotes, increase market depth, and take on some clearing positions when users liquidated their positions So it must retain a large amount of cash as a liquidity reserve that can be called upon at any time But the problem now is that HLP's funds are starting to become idle According to on chain data statistics, HLP's current total assets are approximately $188.7 million, of which approximately $148.7 million remains in the main account, with no open positions or pending orders at snapshot time, accounting for nearly 79% of the total funds. Additionally, approximately $40.06 million has been allocated to seven sub strategies In plain terms, users have invested nearly $190 million in HLP, but only about 20% of the funds have actually entered the market making and trading strategies, leaving nearly $150 million, mostly lying in the account in USDC form Recently, Jeff stated that Hyperliquid's portfolio margin and native lending have reached a production scale that has been tested in practice, and the liquidity of the order book is gradually maturing, no longer requiring HLP to invest so much capital in market making for a long time Therefore, after the next network upgrade, HLP will automatically transfer underutilized USDC to the native lending sub strategy to earn interest When the market requires liquidity, funds can still be used for market making and risk taking. When the market is stable and funds are temporarily idle, it can be lent to users with financing needs Why can we do this now? Firstly, HyperCore's native lending has formed a certain scale. Currently, the reserve assets of native lending are about $762 million, and the outstanding loans are about $114 million, of which USDC supply is about $176 million, lending is about $112 million, and utilization rate is about 63.7%. The current USDC loan has an annualized interest rate of about 5%, and the supplier's annualized return is about 2.87% Secondly, the combination of margin is creating new borrowing demands. Users can place multiple spot and perpetual positions in the same account to calculate margin, borrow USDC by pledging assets, and improve fund efficiency HLP puts some idle USDC into the lending market, which can earn interest on one hand and provide more loanable funds for portfolio margin on the other hand Finally, Hyperliquid's dependence on HLP market making funds is decreasing. Recently, the Hyperliquid Foundation has started allowing eligible infrastructure companies to connect to unverified nodes and provide high-quality, low latency on chain data to professional trading teams More professional market makers can enter the order book to provide liquidity, so HLP does not need to continue using a large amount of funds to provide long-term support The market is responsible for market making, and HLP is now responsible for capital allocation So, how much revenue can this $150 million generate? If calculated statically based on the current USDC supply annualized interest rate of approximately 2.87%, $148.7 million could theoretically generate approximately $4.27 million in interest annually But this is only a scale reference, not a confirmed income. HLP will not invest all its cash into the lending market as it still needs to deal with user redemptions, market making, clearing, and extreme market conditions At the same time, lending rates will also change If HLP increases a large amount of USDC supply without synchronous growth in borrowing demand, both market utilization and supply yield will decrease The impact of this upgrade on HYPE cannot be directly exaggerated. The loan interest obtained by HLP does not equal the income from the Hyperliquid protocol, nor does it equal the funds repurchased by the aid fund from HYPE. Unless new distribution rules emerge in the future, these returns first belong to the HLP strategy and depositors Its impact on HYPE is more indirect: Idle USDC enters the lending market → Loan liquidity increases → Portfolio margin efficiency improves → Transaction scale expands → Agreement generates more transaction fees Of course, improving financial efficiency will also increase risks Previously, USDC had almost no returns in the main account, but it could be called at any time. After entering the lending market, funds begin to bear the risks of collateral decline, centralized liquidation, and insufficient liquidity In extreme market conditions, the order book may require liquidity, liquidation of liquidated positions, and HLP users may also demand redemptions simultaneously Whether the system can timely withdraw funds from the lending market will become a new test So the core of this upgrade is not to use all the money to earn interest But on the premise of ensuring that HLP can undertake market making and clearing responsibilities at any time, it allows temporarily unused funds to generate returns HLP was originally more like the official market maker and liquidity insurance of Hyperliquid Now, with the increase of external market makers, the maturity of portfolio margin and native lending, it is becoming a multi strategy treasury that can automatically allocate funds between market making, lending, and risk reserves Nearly $150 million of idle USDC is starting to earn interest, just a superficial change More importantly, Hyperliquid is trying to make every dollar of liquidity serve more financial businesses at the same time HYPE Hyperliquid HLP DeFi