Bitcoin hedge funds can face Hyperliquid liquidation despite CME profits, analysis says
In brief
- CryptoSlate hypothetical: Hyperliquid moves to liquidate a fund's losing long while the fund stays profitable overall.
- Hyperliquid can't use profits held at CME to cover losses on its own books.
- 20% Bitcoin drop hypothetical: CME short gains roughly $900,000; Hyperliquid long loses about the same.
- CoinRoutes CEO Ian Weisberger cited disorderly liquidations in the October 2025 crypto crash.
Where the money sits
The core problem is timing. Moving money between exchanges takes time, the article said, and withdrawals can slow down or stop during a downturn.
A second hypothetical puts numbers on it. A fund is long Bitcoin on Hyperliquid and short Bitcoin futures on CME, with each position worth $4.5 million. If Bitcoin falls 20%, the short earns roughly $900,000 and the long loses about the same (assuming both contracts track the price equally). CME sees a profitable short, but those profits sit in a different account under different margin and settlement arrangements.
From hedge to directional bet
According to the analysis, the fund could have enough money to cover every position and still lose half its hedge because its profits sit in different accounts. Once Hyperliquid liquidates the long, the fund is left with an unhedged short that loses money if Bitcoin rebounds.
That's the trap.
A strategy built to avoid betting on Bitcoin's direction can turn into a large directional bet. The article added that the more efficiently a fund uses its capital, the less spare money it may have to fix the problem.
Leverage widens the gap
Ian Weisberger, CEO of CoinRoutes, told CryptoSlate that a fund depositing $1 million in USDC could, in theory, control $9 million of Bitcoin positions. In his example (again, hypothetical), the fund starts with $1 million of its own capital and borrows $2 million, giving it $3 million. It puts $1.5 million each on CME and Hyperliquid, then uses derivatives to build a $4.5 million position on each exchange.
Weisberger pointed to the disorderly exchange liquidations during the October 2025 crypto crash as an example of the danger. Traders who thought their portfolios were balanced could be left exposed when a single exchange closed one position without accounting for the other, the article said.
None of these scenarios describe a real fund. They're illustrations of how a balanced book can come apart when the collateral isn't on the exchange where the losses are.
Frequently asked questions
Why can't a profitable CME short cover losses on Hyperliquid?
According to CryptoSlate, Hyperliquid can't use profits held at CME to cover losses on its own books. Those CME profits sit in a different account under different margin and settlement arrangements, so the fund has to bring in more collateral before Hyperliquid closes the position.
What happens to a hedged fund if one leg gets liquidated?
The CryptoSlate analysis said that if Hyperliquid liquidates the long, the fund is left with an unhedged short that loses money if Bitcoin rebounds. A strategy designed to avoid betting on Bitcoin's direction can turn into a large directional bet.
How can $1 million in USDC control $9 million of Bitcoin positions?
In a hypothetical from CoinRoutes CEO Ian Weisberger, a fund starts with $1 million and borrows $2 million, giving it $3 million. It puts $1.5 million on CME and $1.5 million on Hyperliquid, then uses derivatives to build a $4.5 million position on each exchange.
