Two-Regime Liquidity Recovery After a Perpetual Futures Liquidation Cascade: Evidence from Hyperliquid and the October 10, 2025 Event

Abstract

We document the inside-market response of Hyperliquid — the largest decentralized perpetual futures venue — to the October 10, 2025 system-wide liquidation cascade. Using the venue's public L2 order-book archive, we construct a minute-level panel covering BTC, ETH, SOL, XRP, and DOGE perpetual contracts across a 92-day window. Three findings emerge. First, the cascade was a tightly compressed intraday event: median quoted spread pooled across assets reached 9.4 basis points at hour 21 UTC (p95: 87.5 bps), with intraday recovery well under way by end of day. Second, across the 23-day post-event window prior to a separate market-wide selloff, quoted spreads on all five contracts returned to within 1.2 times pre-event levels, and three of five to within 1.1 times. Third, inside-quote depth contracted persistently over the same window, with four of five contracts ending between 66% and 79% of pre-event levels. We interpret these results as two-regime recovery: pricing recovers while inventory commitment persistently contracts. Spread-only metrics systematically understate post-event impairment of venue liquidity.