Original | Odaily Planet Daily ( @OdailyChina )
Author | Asher ( @Asher_0210 )
After the Hyperliquid 50x leveraged whale cashing out multiple orders (for related content, please see: Why did the Hyperliquid whale self-destruct and close its positions? Who is bearing the millions of dollars in losses? ), Hyperliquid encountered a similar crisis again last night. This time, the snipers target was more precise, and he chose the altcoin JELLY, which has a smaller market value and is easier to manipulate, as a breakthrough point.
In a short period of time, the price of JELLY coin fluctuated violently. The 15-minute K-line chart showed that the increase could exceed 100%, and the decrease could exceed 50%, causing the market to fall into extreme conditions. Short-term traders said that the nerves are fighting, and retail investors are going to be liquidated in minutes. How did this hunting operation unfold? Odaily Planet Daily will review the whole picture of the incident for everyone.
JELLY 15-minute candlestick chart
Event review: Hyperliquid vault took over JELLY short orders, from being on the verge of liquidation to forced lossless liquidation
A trader opened a huge short position in JELLY
At 20:53 yesterday, a trader (opening address link: https://hypurrscan.io/address/0xde9593fe5cdc5cb0917f5d5618a111f1174f5c91 ) transferred 3.5 million USDC to Hyperliquid as margin and opened a short order of 430 million JELLY (worth approximately US$4.08 million) on its platform with an opening price of US$0.0095.
Hyperliquid Vault Receives Huge Short Positions Due to Trader Automatic Liquidation
A JELLY price manipulation address (link to the price manipulation address: https://intel.arkm.com/explorer/address/Hc8gNSMaQiahiRiGjUfTaW8AXudRJHeGoeGpAn8WRcwq ) cooperated with the spot market to lower the price of the currency after the short order was opened, so that there was floating profit space for the short order. At 21:03 yesterday, the trader closed 30 million JELLY short orders (worth about 310,000) at a price of 0.0103 US dollars, and then withdrew the margin of 2.76 million US dollars, resulting in the forced liquidation of his 398 million JELLY short orders (worth about 4.5 million US dollars) by Hyperliquids liquidation address at a price of 0.0113 US dollars.
JELLY prices rose rapidly, and Hyperliquids vault once suffered a loss of more than 10 million US dollars
At 21:45 yesterday, the intensive purchases by the address manipulating the price of the currency further magnified the floating loss of the vault, and the floating loss of the Hyperliquid vault once exceeded 10 million. According to the monitoring of the on-chain analyst @ai_ 9684 xtpa, if the market raises the price of the currency to around $0.17, the vault will face liquidation and lose the current $240 million. According to the deposit and withdrawal records of the vault at that time, some vault funds were fleeing, but the amount was not large, which may be the behavior of retail investors.
Hyperliquid vault attacked
Hyperliquid delists JELLY, and OKX and Binance launch JELLY contract trading
According to the description of KOL Wang Xiaoer ( @brc20niubi ) on the X platform (CZ also commented on the content), a few minutes before OKX and Binance announced the launch of JELLY contract trading, Hyperliquid was ready to admit defeat and completely removed JELLY trading. The following figure is Wang Xiaoers review of Hyperliquids operation and CZs comments.
KOL Wang Xiaoers review of the Hyperliquid incident
The “unplugging the network cable” ended: the settlement of JELLY at a price of 0.0095 USD was not only not a loss, but a profit.
“I heard you guys wanted to rip me off, so I just settled my position.” After Hyperliquid removed JELLY from the market, it settled its position at $0.0095 (the previous opening price for short-selling JELLY traders), involving 392 million JELLY tokens. In the end, it not only did not lose money, but also made a profit of $703,000.
Instead of losing money, he made a profit of $700,000
Official response: Validators voted to remove JELLY, and user losses will be borne by Hyper Foundation
Regarding the centralized operation of Hyperliquid removing JELLY from the shelves and completing the settlement at a favorable price of $0.0095, the official also responded positively to the incident at the first time. The specific content is as follows:
Due to abnormal market activity, the validators voted to remove the JELLY perpetual contract. After collective discussion among the validators, it was finally decided to remove the JELLY trading pair to maintain market fairness. In addition to the marked addresses, the funds lost by all users will be compensated by the Hyper Foundation. The compensation will be automatically executed based on the on-chain data, and users do not need to submit work orders. The specific calculation method will be detailed in subsequent announcements;
The collective decision-making mechanism of validators helps maintain the stability of the network. Similar to other blockchains, validators sometimes need to make collaborative decisions to deal with emergencies and ensure the integrity of the network. At present, the transparency of the system and the robustness of the voting mechanism will be the focus of improvement to enhance governance effectiveness;
HLP currently has a 24-hour profit of approximately 700,000 USDC, and technical improvements are ongoing. Through this event, the team will optimize the system, enhance risk resistance, and make the network more robust after learning from experience. More details will be announced later.
Official response to Completion of settlement of JELLY at a favorable price
Although the official emphasized that the removal of the JELLY trading pair was the result of collective discussion among validators, Hyperliquid, as a decentralized trading platform, inevitably aroused more doubts by making such a centralized operation as pulling the plug . Odaily Planet Daily has compiled the views of industry insiders on the incident for everyone.
Hyperliquid JELLY liquidation incident hotly discussed in the industry: centralized manipulation, trust crisis and systemic risks
Arthur Hayes: Stop pretending to be decentralized, HYPE will be back to square one
Arthur Hayes, co-founder of BitMEX, wrote a post on the X platform commenting on the Hyperliquid JELLY liquidation incident and said, HYPE cannot afford the impact of the JELLY incident. Lets stop pretending that Hyperliquid is decentralized; and then lets stop pretending that traders really care; I bet HYPE will soon return to the starting point, because gamblers are gamblers after all.
ZachXBT: Hyperliquid officials did nothing about North Korean hackers using stolen funds to short, but manipulated market prices
Chain detective ZachXBT criticized Hyperliquid on the X platform, saying: “It’s infuriating that Hyperliquid officials can draw lines and manipulate prices at will, but when North Korean hackers use Radiant stolen funds to hold a certain size of short positions on it, they do nothing.”
Bitget CEO: Hyperliquid may be on the road to FTX 2.0
Bitget CEO Gracy Chen posted on the X platform that Hyperliquids handling of the JELLY incident was immature, unethical, and unprofessional, resulting in user losses and severely damaging its reputation. Although the platform claims to be an innovative decentralized exchange with a bold vision, its actual operation is more like an offshore centralized exchange, without KYC/AML mechanisms, which promotes illegal capital flows and bad behavior. The decision to close the JELLY market and force the settlement of positions at a favorable price sets a dangerous precedent. For any exchange (whether CEX or DEX), trust is more important than money, and once lost, it is almost impossible to recover.
In addition, the platforms product design has serious flaws: the mixed capital pool exposes users to systemic risks, while the unlimited position size provides opportunities for market manipulation. If these problems are not resolved, more altcoins may be used against Hyperliquid, putting it at risk of becoming the next major collapse case in the crypto industry.
Andre Cronje: Position size is not a fixed function of leverage, DeFi should not have fixed value leverage
In response to the Hyperliquid vault facing liquidation and losses, Sonic Labs co-founder Andre Cronje posted on the X platform: Position size is not a fixed function of leverage, but depends on available liquidity and realized volatility. Small positions can be 1,000 times leveraged, and large positions can only be 1.2 times. There can be no fixed values in DeFi.
CZ cited an old article saying that DEX is not as good as CEX, and emphasized that it has nothing to do with the Hyperliquid liquidation incident
In addition, CZ quoted a previous tweet on the X platform and said: I know I am not smart. I will admit when I dont understand, and I often feel that those powerful people must have mastered some tricks that I dont know to do things that I cant do. But occasionally, I will find that the most basic rules still apply. It is worth noting that CZ specifically explained that in order to avoid confusion, the tweet has nothing to do with the liquidation of Hyperliquid today, but is his previous experience of trying to use AstherusHub on the BSC chain, which is a project in the Labs portfolio. They do not display the forced liquidation price and use the automatic liquidation mechanism (ADL), so there will be no similar problems today.
Impact on Hyperliquid: TVL dropped sharply, USDC outflow trend was obvious
Several hours have passed since the incident, and the storm seems to have subsided on the surface, but its impact on Hyperliquid is still far-reaching and heavy. According to data from Hyperliquids official website, HLPs TVL was as high as 240 million US dollars before the incident, but has now dropped sharply to 195 million US dollars, with nearly 20% of funds lost in a short period of time. This drastic fluctuation reflects the markets shaken trust in the platform, and investors confidence has obviously not yet recovered.
In addition, according to DefiLlama data, after the Hyperliquid liquidation incident, there was a large-scale outflow of USDC funds on the platform, with a total net outflow of up to US$175 million. The total USDC holdings dropped sharply from US$2.217 billion before the incident to US$2.004 billion.
USDC net outflow data on Hyperliquid
summary
The hunting of Hyperliquid has completely exposed the governance and transparency issues of decentralized perpetual contract exchanges. Although the official reason given was that the validators voted to remove the trading pair, the final pulling the plug and forcing the settlement has caused many people to question the decentralization of DeFi exchanges.
This incident also reminds all DeFi projects that relying on the label of decentralization is far from enough. When encountering extreme market conditions, the key is whether the platform can stabilize the situation while maintaining fairness and transparency. In the future, if decentralized on-chain DeFi projects want to win market trust, they must find a better balance between transparency, governance mechanisms and risk control, otherwise similar crises may not be the last.
