How Does Felix USDhl Work?
Felix USDhl was a T-bill-backed stablecoin on Hyperliquid that distributed yield in WHYPE tokens to active traders and liquidity providers. The protocol officially sunsetted reward distributions on December 20, 2025, and directed users to USDH as a replacement — which itself was discontinued by Native Markets in May–June 2026. Approximately $1M in residual TVL remains from users who have not yet exited. The underlying M0 reserve backing is intact and redemptions are still possible.
TVL
$1M
Sector
Yield
Risk Grade
B-
Value Grade
C
Core Mechanisms
6.1.1
USDhl backed 1:1 by M0 wholesale dollars collateralized by short-term US Treasury bills with on-chain reserve attestations
Fiat-backed stablecoin model using M0 infrastructure. Reserve attestations provide transparency but depend on M0 oracle accuracy.
2.2.1
Novel100% of USDhl fees distributed to users as WHYPE tokens proportional to activity on eligible venues (trading volume, LP provision)
Novel yield distribution model where T-bill yield is converted to WHYPE rewards allocated by venue activity rather than holding. Reweighted biweekly. Rewards ended December 20, 2025.
7.1.1
HYPE token rewards distributed every 2 weeks to incentivize USDhl usage across HyperCore and HyperEVM venues
Standard liquidity mining pattern but with biweekly reweighting across eligible venues. Rewards program ended December 2025.
4.1.3
USDhl integrated into Curve stableswap pools on Hyperliquid EVM for low-slippage stablecoin swaps
Standard Curve-style stableswap integration for USDhl liquidity. Depends on peg stability and pool depth.
6.4.1
Price feeds audited by Three Sigma with corrected peg assumptions and deviation thresholds for USD pricing path
External oracle feeds with Three Sigma-audited parameters. USDC depeg scenario specifically addressed in audit.
2.3.2
Felix Protocol team manages treasury and reward distribution with discretionary control over venue allocations and reweighting
Team-managed operations for reward allocation. Contributors from Three Sigma auditing firm provide security credibility.
How the Pieces Interact
Users receive yield in WHYPE tokens rather than stablecoins, creating price risk. If WHYPE value declines significantly, the effective yield on USDhl drops below the underlying T-bill rate, potentially triggering redemptions.
If M0 reserve attestation lags or becomes unavailable, the oracle may report stale collateral data. During a T-bill market stress event, there could be a gap between actual reserve value and reported backing.
A perceived risk to M0 reserves could trigger USDhl selling in Curve pools, pushing the stableswap invariant to its edge where slippage increases dramatically. Pool LPs would absorb disproportionate losses.
Team discretion over venue allocation and reweighting could be used to favor specific venues or participants, creating uneven reward distribution that disadvantages organic users.
Incentivized liquidity in Curve pools attracts mercenary capital that will withdraw when rewards decrease, potentially leaving thin liquidity for USDhl at exactly the moment organic demand is needed.
What Could Go Wrong
- USDhl is officially deprecated — Felix Protocol ceased reward distributions on December 20, 2025, and directed users to USDH; the stablecoin is no longer actively maintained or developed
- USDH (the successor stablecoin Felix directed USDhl users toward) was itself sunsetted by Native Markets in May–June 2026, leaving no sanctioned migration path for remaining USDhl holders
- Residual $1M TVL represents users who have not yet exited; Curve pool liquidity is thin and simultaneous redemptions could cause a temporary depeg before M0 reserves clear
- M0 infrastructure dependency for remaining redemptions — users wishing to exit still rely on M0's operational status for on-chain reserve verification and settlement
M0 Reserve Confidence Crisis
TailTrigger: Concerns about M0 Treasury bill reserve integrity or regulatory action against M0 infrastructure triggers loss of confidence in USDhl backing
- 1.Questions emerge about M0 reserve attestation accuracy or T-bill liquidity — Sophisticated users begin redeeming USDhl for underlying M0 dollars, reducing circulating supply
- 2.USDhl secondary market sellers overwhelm Curve pool liquidity — USDhl depegs below $1 in stableswap pools as selling pressure exceeds LP depth
- 3.WHYPE reward distribution continues based on now-depegged USDhl — Yield calculations become distorted, and users holding USDhl face both capital loss and reduced real yield
- 4.Felix Protocol pauses new USDhl minting and WHYPE distributions — All USDhl holders locked in depreciating asset until M0 reserve situation is resolved
Risk Profile at a Glance
Overall: B- (31/100)
Lower score = safer