Key Highlights
- Hyperliquid CEO Jeff Huang highlighted research comparing visible TWAPs with reconstructed hidden executions.
- Visible TWAPs recorded about 9 basis points lower temporary market impact than comparable hidden flow.
- Hidden executions were reportedly more costly in 81% of comparable cases.
Hyperliquid CEO Jeff Huang has highlighted new research examining whether publicly visible trading intentions on the platform lead to worse execution or instead attract additional liquidity.
In a post on X on August 19, Huang pointed to the paper, “Trading in the Sunshine or in the Shade: Market Impact and Adverse Selection on Hyperliquid,” by Davide Barone and Fabrizio Lillo.
The study examines Hyperliquid perpetual futures and compares native TWAP orders, whose direction and execution are visible while they are being placed, with trading activity reconstructed to represent less visible execution.
Huang said the findings support an argument he has made previously: transparency does not necessarily work against traders when the flow is not considered toxic.
Study finds lower impact for visible TWAPs
The research focuses on time-weighted average price (TWAP) orders, which split a large trade into smaller executions over a set period. The researchers compared visible native TWAPs with comparable hidden executions while accounting for factors including order size, duration, participation rate, and market volatility.
According to figures highlighted by analyst Shaunda Devens, visible TWAPs experienced approximately 9 basis points lower temporary market impact than comparable hidden executions.
Devens also said hidden flow was more expensive in 81% of comparable cases, with the median impact reportedly 2.3 times higher and short-duration executions showing a difference of up to 5 times.
The findings suggest that making a large order visible did not automatically result in other traders moving prices against it.
Market makers added liquidity around visible orders
The study also examined how liquidity providers responded when a visible TWAP began executing.
Devens said market depth on the side absorbing the TWAP increased by approximately $4,200, while the cost of sweeping a $10,000 order declined after the TWAP started.
The research found that the inside spread widened by approximately 0.28 basis points.
According to Devens, the data suggests market makers responded by placing additional liquidity behind the best available quote rather than simply tightening the spread. “Perhaps counterintuitively, transparent execution improves fills rather than worsening them, as market makers step in to facilitate the large, predictable volume,” he wrote.
The result runs against a common concern surrounding transparent markets: that publicly visible orders allow other traders to anticipate the trade and profit at the original trader’s expense.
Jeff Huang revives transparency debate
Huang said the findings address a question he has discussed publicly for years. He wrote, “I’ve defended from first principles that transparent trading ought to improve execution for non-toxic flow.” He described the research as an empirical test of that argument rather than relying solely on theoretical assumptions.
“The paper demonstrates that liquidity net tightens as onchain TWAPs surface, improving the average execution of the TWAP order,” he added.
Huang also acknowledged that the broader debate over transparent markets is not necessarily settled by a single study.
Findings do not end the transparency debate
The results provide evidence for one type of trading activity, but they do not necessarily establish that transparency improves execution in every market condition. Large orders can still move prices, particularly when liquidity is limited, or the trading flow is considered informed or toxic.
The study also focuses specifically on Hyperliquid perpetual futures and visible TWAPs, meaning its findings may not directly apply to every type of asset, order, or trading venue.
That suggests the question is not simply whether markets should be transparent or private, but which types of orders benefit from visibility and which may require alternative execution mechanisms.
What the research shows
The findings add data to an ongoing debate over how much transparency affects execution in onchain markets. In the Hyperliquid sample, visible TWAPs were associated with lower temporary market impact than comparable hidden executions.
That does not mean transparent orders will always receive better execution. The study covers a specific set of TWAP trades on Hyperliquid, and the results could differ for larger orders, other trading strategies, or different market conditions.
The research also comes as TWAP-based execution is being used elsewhere in crypto. Polymarket has adopted TWAP pricing for its crypto markets, while the Ethereum Foundation has used TWAP execution to split large ETH transactions into smaller orders over time.
These uses are not directly comparable to the Hyperliquid study, but they reflect the broader use of execution methods that spread trading activity over a defined period rather than relying on a single transaction or price.
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