Two months on from October 10’s crypto market meltdown, which noticed $19 billion of positions liquidated, Gauntlet CEO Tarun Chitra argues that frequent autodeleveraging (ADL) mechanisms led to large losses on Hyperliquid.
In a prolonged put up to X, Chitra says an extra of $650 million was autodeleveraged from worthwhile merchants’ positions. The quantity, he claims, was 28x greater than the potential dangerous debt going through the exchanges who used ADL.
This “massacre of the innocent” may allegedly be prevented with new ADL algorithms, described in an accompanying 95-page report.
Autodeleveraging on autopilot
Chitra describes ADL as a “last resort” which applies a “haircut” to worthwhile merchants to “cover the bad debt of insolvent positions.”
The ten-year-old “Queue” algorithm is extensively utilized by perpetual futures platforms akin to Binance, Hyperliquid, and Lighter.
Nevertheless, underneath excessive market situations, when ADL is activated repeatedly, “the greedy Queue strategy completely fails.”
The technique assigns “haircuts” as a perform of income and leverage which, Chitra says, concentrates losses on the most important winners, whereas overshooting the mandatory quantity to be liquidated.
He suggests a “risk-aware pro-rata” algorithm which assigns ADL based mostly on the leverage of every place.
The put up acknowledges that “a perfect [ADL] strategy does not exist.” Nevertheless, optimizing for 3 parts of a so-called ADL Trillema (solvency, equity and income), and working on October 10 Hyperliquid knowledge, the brand new strategy seems to considerably outperform Queue.
Chitra ends by urging for additional innovation within the design of algorithmic clearing: “ADL was invented as a band-aid in 2015. We haven’t even begun to explore the design space!”
Hyperlivid
In response to Chitra’s put up, Hyperliquid’s Jeff Yan quipped, “Those who can, do. Those who can’t, fud.”
Nevertheless, slightly than responding on to the claims of inefficient autodeleveraging, he takes challenge with the outline of the connection between ADL and Hyperliquid’s HLP insurance coverage fund.
He accused Chitra of “spread[ing] lies masked by fancy ML terms to sound smart.”
Different Hyperliquid supporters pitched in, pointing to obvious inaccuracies and bias because of investments in rivals.
Those that can, doThose who cannot, fud
Earlier than writing a paper perhaps study the definition of what you might be learning? ADL doesn’t “transfer pnl to HLP.” It treats HLP completely symmetrically with customers. **ADL has nothing to do with HLP or backstop liquidations**
ADL didn’t… pic.twitter.com/kGiI4wvYNy
— jeff.hl (@chameleon_jeff) December 10, 2025
Within the wake of the October 10 crash, Yan argued that “ADLs net made users hundreds of millions of dollars by closing profitable short positions at favorable prices.”
He highlighted that the platform’s ADL queue incorporates “both leverage used and unrealized pnl,” whereas thanking customers for suggestions. He additionally alluded to analysis “on whether there can be substantial improvements that merit more complexity.”
