Hedging on Hyperliquid

A concentrated liquidity range holds the volatile token, so it loses value when that token falls. Tuo offsets most of that exposure with a short perpetual position on Hyperliquid, sized by the engine and funded from the same deposit.

What the hedge does

A short perpetual gains when the underlying falls and loses when it rises. Paired with a range that does the opposite, the two move against each other and the position stays close to market-neutral. Fees from the range are the return; the hedge is there to protect it.

The hedge is not exact. It is reviewed once a day, it is sized to a target that is deliberately below 100% for some sleeves, and it carries funding costs that cut both ways. See Market and strategy risk.

Two sizing models

Between them, the two products run five hedge legs but only two rules.

Fixed at deploy sizes the short once, off the full value of the range when it opens. It is a simple, cheap hedge for a range that is expected to be short-lived.

Tracked daily follows the range's actual exposure to the volatile token, which shifts as the price moves inside the range. The engine computes the exact Uniswap V3 exposure every day and resizes the short only when coverage has drifted past the trigger, so it does not pay a spread on every small move. The 80% target leaves roughly 20% of the exposure unhedged on purpose.

Margin for each short comes from the same deposit and is held at 2x or 3x leverage, with a margin cushion above the venue's minimum so an adverse move does not liquidate the short before the engine can act.

One short, two ranges

Basis Plus Core runs two WBTC/USDC ranges but holds a single BTC short. The tracked model sizes it for both ranges at once, so neither is left uncovered. Making a shared short smaller is never automatic: an operator confirms it, because shrinking it to fit one range would uncover the other.

Which markets

BTC and ETH perpetuals only. The WETH/USDC range is hedged in ETH; every WBTC/USDC range is hedged in BTC.

One account per position

Hyperliquid credits a deposit to the address that sent it, and a smart contract cannot sign Hyperliquid orders. So the vault cannot hold the hedge itself. Each position is assigned its own operator account: an externally owned address whose key lives in a cloud HSM and is operated by Tuo's backend. The vault pays margin to that address, the address deposits it on Hyperliquid and signs the short, and the vault pulls the margin back from the same address when the hedge closes.

• A position binds to the first operator it bridges to and can never be re-pointed.
• Only operators on the treasury-maintained allowlist can receive margin.
• The operator is never reused for another position.
• There are no shared accounts, no sub-accounts and no delegated API keys.

How margin moves

Margin travels between Arbitrum and Hyperliquid over Circle's CCTP, a burn-and-mint bridge for USDC. The transfer takes seconds each way and costs a small fee, listed on Venue and bridge costs. Hyperliquid's older deposit bridge remains available as a fallback rail.

Amounts are measured, never predicted. The vault records the USDC that actually arrived back, not the amount that was sent. A hedge that lost money returns less than it was sent; a hedge that gained returns more. Because the contract cannot value the venue leg, it only accepts the return once the keeper attests that nothing is left at the venue, and only while a withdrawal request is armed. See Valuation.

Funding

A perpetual short pays or receives funding depending on the market. When shorts are paid, funding adds to the return. When shorts pay, it subtracts. Funding is part of the strategy's return, not a Tuo fee, and the engine tracks it as an input to its signals.

Liquidation

The short is held with a margin cushion, and the engine's daily review resizes it when coverage drifts. A move large and fast enough to liquidate the short before that review would leave the range unhedged and the margin lost. The vault handles that extreme by writing off the margin when the venue account reads empty, so the owner can still withdraw the on-chain leg. See Market and strategy risk.

For integrators

On-chain, the hedge leg is bridgeToHl(nftId, amountUsdc, operator) outbound and markBridgeInboundComplete(nftId, amountReturnedUsdc, finalReturn) inbound, both keeper-only. The vault books bridged margin at par in the position's hlMarginBridged and refuses to settle while it is non-zero. See Events and integration.