The Hyperliquid Funding Arbitrage strategy is designed to generate stable, low-risk yield by exploiting funding rate inefficiencies in perpetual futures markets on the Hyperliquid exchange. It operates on a delta-neutral basis, ensuring minimal directional exposure to asset price movements.

The strategy accepts deposits in USDC and allocates capital across perpetual futures contracts for HYPE, BTC, ETH, PUMP, FARTCOIN, XPL, and PAXG. It systematically opens opposing positions in the spot and perp markets to neutralize directional risk, capturing the positive funding rates paid to traders holding short perp positions.

In addition, 10% of USDC reserves are allocated to the Hyperliquidity Provider vault (HLP). This additional exposure helps to diversify yield sources and stabilize returns during periods of extreme bearish volatility.

For the funding arb strategy, while delta exposure is hedged, exposure to the funding rates of the short positions remains. There is also limited exposure to HLP. These exposures dictate overall returns.

Exposures:

BTC Funding Rates
ETH Funding Rates
PUMP Funding Rates
HYPE Funding Rates
FARTCOIN Funding Rates
XPL Funding Rates
PAXG Funding Rates
HLP Vault (10% of USDC Reserves)

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