Hyperliquid (HYPE) at Critical Juncture: Will $40 Support Hold After 30% Drop From ATH?

Hyperliquid''s native token HYPE is teetering on the edge—again. After a blistering rally to record highs, the correction has traders sweating the $40 support level.

The make-or-break moment

Market structure shows clear exhaustion after the parabolic move. Now the question isn''t whether HYPE will test $40—it''s whether the level will hold like a prudent liquidity zone or crack like a meme coin''s fundamentals.

Liquidity hunters are circling

Order books reveal thin bids below $40, suggesting a breakdown could trigger algorithmic sell cascades. But perpetual funding rates remain neutral—no panic yet from leveraged longs.

Remember: In crypto, ''support'' is just where bagholders convince themselves to average down before the next leg down. Either way, volatility''s coming back to the menu.

Hyperliquid pauses price discovery 

Hyperliquid extended gains on Monday, building on positive sentiment likely driven by Bitcoin (BTC)''s brief recovery above the $107,000 resistance. However, potential profit-taking following the uptick to new record highs and tensions in the Middle East due to the conflict between Israel and Iran is shifting sentiment and keeping the broader cryptocurrency market on the edge. 

QCP Capital''s market update highlights that the composure exhibited by the crypto market "in the face of rising geopolitical risk" is remarkable. However, Hyperliquid risks prolonged losses below the short-term $40.00 support, especially if the derivatives market Open Interest (OI) extends the downtrend.

CoinGlass shows that OI, which represents the number of active futures and options contracts yet to be settled or closed, has declined by nearly 8% to $1.91 billion over the past 24 hours. 

The volume surged in tandem by more than 54% to $2.89 billion, underscoring the rising liquidations. Approximately $1.77 million was liquidated in the last 24 hours, with the long position leading with $1.23 million compared to roughly $542,000 in shorts.

Hyperliquid derivatives stats | Source: CoinGlas

A persistent drop in OI WOULD indicate declining interest in HYPE and the lack of trader conviction in the price discovery phase. For now, all eyes are on the ability of support at $40.00 to hold and give way for the resumption of the uptrend or cave in, signaling shifting market dynamics.

Technical outlook: HYPE bears tighten grip

Hyperliquid is trading at around $40.13 at the time of writing, marking a 12% drop from the record high of $40.72, reached on Monday. 

The path of least resistance has shifted downward, accentuated by a sell signal from the Moving Average Convergence Divergence (MACD) indicator on the daily chart below. 

Traders will look for the blue MACD line to cross below the red signal line to ascertain bearish momentum. The sell signal often encourages traders to reduce exposure to HYPE. This, together with potential profit-taking due to the run-up to new record highs, could accelerate the downswing below the $40.00 support level.

HYPE/USDT daily chart

The Relative Strength Index (RSI) swing below overbought territory, heading toward the 50 midline, signals a firm bearish grip. Key areas of interest under the $40.00 zone, marked green on the chart, include tentative support at around $36.00, the 50-day Exponential Moving Average (EMA) at $32.01 and the 100-day EMA at $27.41.

Open Interest, funding rate FAQs

How does Open Interest affect cryptocurrency prices?

Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is considered the equivalent of increase in efficiency and the ongoing trend continues. When Open Interest decreases, it is considered a sign of liquidation in the market, investors are leaving and the overall demand for an asset is on a decline, fueling a bearish sentiment among investors.

How does Funding rates affect cryptocurrency prices?

Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies there is a bullish sentiment among market participants and there is an expectation of a price hike. A consistently negative funding rate for an asset implies a bearish sentiment, indicating that traders expect the cryptocurrency’s price to fall and a bearish trend reversal is likely to occur.