Flash Crash and the Rise of HyperLiquid

Jeff Yang had a rude awakening at 5 a.m. when his alarm went off. It was set to ring if anything out of the ordinary occurred at HyperLiquid, the decentralized crypto exchange he co-founded. And on that particular morning, things felt really off.

On that day, over $19 billion in leveraged trading positions vanished as President Donald Trump hinted at further tariffs on China, according to data from Coinglass, a crypto analysis platform. “I’m just watching and hoping it all works,” Yang remarked about the exchange’s system. Within an hour, after scrupulously analyzing the data, he felt confident that the platform had held up well during a stress test where numerous traders lost money, while others profited from shorting the market.

In the following weeks, the crypto community began to label the October 10 event as the Flash Crash. It marked the largest liquidation event ever documented by Coinglass, and its effects are still being felt across the industry. More importantly, it underscored how HyperLiquid has emerged as a significant player in the crypto sphere.

Coinglass noted that HyperLiquid liquidated positions worth $10 billion that day, overwhelming the amounts liquidated by established exchanges like Bybit and Binance, which recorded $4.6 billion and $2.4 billion respectively. The $10 billion figure represents total leveraged positions liquidated, not the direct losses incurred by traders.

Unlike major exchanges like Binance or Coinbase that employ thousands, HyperLiquid Labs operates with just 11 people. Within two years, it has risen to compete with the bigger players, boasting a derivatives trading volume of about $140 billion last month, according to DefiLlama. This equates to more than $616 million in annual revenue, placing its cryptocurrency, known as HYPE, as the largest in its category, with a market cap of roughly $5.9 billion.

Yet Yang isn’t satisfied. He expressed, “This is something that no one is really trying to build right now and that could genuinely modernize the financial system.”

The Unassuming Innovator

In a realm often characterized by charismatic and loud personalities, Yang stands apart. With his black-rimmed glasses and neatly styled dark hair, he often feels out of place in the limelight. He recalls feeling overwhelmed when he was approached by fans at a recent crypto conference in South Korea. While happy to share his story, he emphasizes that HyperLiquid is a team effort, not an individual accomplishment.

Still, Yang clearly plays a pivotal role in the ascent of crypto protocols. A native of the Bay Area, he’s the embodiment of a young prodigy; he even won medals at the International Physics Olympiad before heading to Harvard for mathematics and computer science.

“He’s always been calm and thoughtful,” shared Vladimir Nowakovsky, who once interned with Yang. (Interestingly, Nowakovsky later founded a competing exchange. Yang, however, does not remember meeting him, as stated by a HyperLiquid Labs spokesperson.)

As Yang graduated from Harvard, figures like Sam Bankman-Fried were capturing attention in the crypto world with their flashy operations. Bankman-Fried started Alameda Research and later launched the FTX exchange, known for derivatives trading that allows users to speculate on future asset prices without holding the underlying assets. While this was happening, Yang and his team chose to remain cautious, favoring platforms like Coinbase instead of risking their strategies with less transparent players like FTX. “The dynamic between Alameda and FTX didn’t sit right with us,” he noted, explaining why they opted for a more secure approach.

The Impact of FTX’s Collapse

FTX turned out to be a disaster. Bankman-Fried mismanaged billions in customer funds, funneling them into extravagant real estate and questionable investment ventures. It wasn’t until FTX went bankrupt that investors realized the extent of the losses.

This event cemented Yang’s resolve to develop a transparent trading platform focused on cryptocurrency derivatives. Earlier discussions about creating a decentralized exchange had been tentative, but post-FTX, he felt it was a necessity. While other exchanges like dYdX were already in the game, they often lagged in usability. “The user experience on centralized exchanges was vastly superior, and DeFi players really weren’t stepping up to match it,” he reflected.

Yang and his team decided to create a platform that they themselves would want to use. “It’s beneficial when developers understand their user base,” emphasized Nowakovsky.

In contrast to Bankman-Fried’s lack of professionalism, Yang presents a polished image, as noted by a long-standing crypto exec who has interacted with both founders. “Jeff presents himself well; SBF did not,” they remarked, indicating a noticeable difference in their appearances and attitudes.

Moreover, Yang’s team has intentionally avoided venture capitalist funding. Relying on the success of their crypto trading operations, he aimed to maintain autonomy. “To create a reliable platform for everyone, it’s crucial to keep insiders at bay,” he stated.

In 2023, they launched HyperLiquid, designed to function as a decentralized exchange. Despite steady growth throughout the year, interest skyrocketed in early 2025, bringing significant attention to the platform.

HyperLiquid is engineered for speed, which is critical in trading where timing can dictate profits or losses. Pseudonymous user Thanos Alpha mentioned, “I’m always asking the team for new features, but they resist because they focus on maintaining speed.”

This combination of quick transaction capabilities and innovative engineering enables HyperLiquid to manage larger trades than many competitors, positioning it well for future growth, according to the trader. He chose to remain anonymous, a common request in the crypto world.

Now, HyperLiquid is drawing interest from beyond just anonymous traders. Major venture capital firms, including Paradigm and Andreessen Horowitz, are investing in HYPE, and even companies like PayPal are noticing its potential. Discussions about launching Hyperliquid-branded stablecoins have been prevalent among various firms. David Shamis from Atlas Merchant Capital is actively accumulating HYPE, stating, “It’s more than just cryptocurrency transactions.”

Envisioning Financial Infrastructure

Yang envisions HyperLiquid as the AWS of financial infrastructure, akin to the cloud service that underpins much of the web. Independent developers are introducing various non-crypto assets to trade, such as stocks related to major companies like NVIDIA and Google. Some validators, who operate the servers that process transactions, are also benefiting financially from this ecosystem.

However, growth isn’t guaranteed. Competitors are emerging to challenge HyperLiquid’s newfound influence, such as Nowakowski’s own Reiter platform, which has received backing from Founders Fund and other investors. Additionally, Astor, a company modeling its operations after HyperLiquid and affiliated with Binance, presents further competition.

Legal uncertainties also loom over HyperLiquid, much like many DeFi projects. Unlike users of traditional financial platforms, HyperLiquid’s users remain anonymous and do not undergo identity verification, leading to potential risks, including links to entities like North Korea that are involved in high-profile hacking activities.

A representative for HyperLiquid Labs mentioned that the platform actively monitors for suspicious behavior and has measures in place to block flagged accounts.

If HyperLiquid continues to succeed, it may attract greater regulatory attention. “It’s uncertain how long non-KYC operations will remain acceptable,” speculated a crypto market maker, asking to remain unnamed to convey his concerns more candidly.

“The larger they grow, the larger the questions will be,” he added.

In response, a HyperLiquid spokesperson stated, “We are in discussion with regulators and policymakers to enhance transparency in decentralized finance.”

Yang intends to fortify his team as HyperLiquid navigates the evolving competitive landscape and adapts to regulatory changes to realize his vision for a transformed financial system. Recently, he announced plans to expand HyperLiquid Labs by nearly 30%, growing from 11 to 14 employees.