On Wednesday (August 27), the pre-listing token XPL of the Plasma blockchain surged nearly 200% in just five minutes on the decentralized derivatives trading platform Hyperliquid, rising from about $0.60 to $1.80, before quickly falling back to $0.06, attracting widespread market attention.
According to analysis from a blockchain data platform, four whale addresses (0xb9c, 0xe41, 0x006, 0x894) profited approximately $47.5 million from this price fluctuation. Among them, address 0xb9c is believed to be the main operator, who established a long position in XPL by deploying nearly $11 million in USDC on Hyperliquid and quickly closed the position after the price surge, making over $16 million in a single trade.
This price fluctuation led to many short traders facing forced liquidations, with one user losing about $4.59 million. X platform user CBB also stated that he lost $2.5 million on his XPL short position and mentioned that he might never use isolated margin trading again.
It is noteworthy that the price fluctuation of XPL only occurred on the Hyperliquid platform, with no similar fluctuations seen on major centralized exchanges like Binance and Bitget, further raising market suspicions of price manipulation. This abnormal price fluctuation occurred just five months after the "disaster" involving the JELLY token on Hyperliquid.
On the evening of March 26, a trader deposited $3.5 million USDC as margin on Hyperliquid and opened a short position of 430 million JELLY tokens, with an opening price of about $0.0095, a notional value of about $4.08 million, and leverage as high as 50 times. Since JELLY is a low market cap, low liquidity meme token, this massive short position immediately put significant pressure on the platform's liquidity pool (HLP).
Shortly after the short position was established, abnormal operations appeared on-chain: a whale holding 126 million JELLY began to sell a large amount of tokens, causing the spot price to plummet and briefly allowing the trader's short position to show a profit. Subsequently, the trader closed about 30 million short positions and withdrew $2.76 million in margin. The remaining 398 million short positions were taken over by Hyperliquid's liquidation mechanism, with the HLP passively taking over at a price of about $0.0113, putting the platform's liquidity pool at significant risk.
The whale then quickly bought JELLY, driving the price up, and within just one hour, the price surged from less than 1 cent to over 3 cents, an increase of more than 515%. The short positions held by the HLP became deeply trapped, with paper losses exceeding $12 million at one point, bringing the treasury close to liquidation. During this time, some centralized exchanges like Binance and OKX quickly jumped in to "take advantage," announcing the launch of JELLY perpetual contracts.
Ultimately, Hyperliquid chose to "pull the plug" to stem the losses, and the official team urgently delisted the JELLY trading pair and froze the market.
Afterward, the Hyperliquid team also released an official statement on Discord, stating that the validator committee voted to delist the JELLY perpetual contract due to suspected market manipulation and promised that all affected users' losses, except for malicious addresses, would be fully compensated by the Hyper Foundation, executed automatically based on on-chain data without requiring users to submit support tickets.
Previously, Hyperliquid founder Jeff emphasized in a post that the platform's decentralized margin design based on "essential principles" could limit manipulation costs without relying on centralized intervention while balancing user usability and risk management. However, the consecutive occurrences of the JELLY and XPL incidents exposed the gap between theory and reality. Moreover, these two incidents also showed clear commonalities.
First, both abnormal trades involved tokens with limited liquidity and small market sizes, making them susceptible to manipulation by a few "whales." In the JELLY incident, the whale caused the HLP liquidity pool to show a temporary loss of tens of millions of dollars through large sell-offs and price manipulation; in the XPL incident, four whale addresses pushed the token price up nearly 200% in five minutes, profiting tens of millions of dollars. Low liquidity, high leverage, and concentrated holdings became the main factors triggering the price anomalies.
Additionally, both incidents exposed the inadequacies of Hyperliquid's risk control and liquidation mechanisms. The platform allows users to open high-leverage positions, and while the automatic liquidation mechanism can maintain system operation when the market is manipulated or margin is withdrawn, it is difficult to prevent significant losses for the treasury or users.
At the same time, Hyperliquid's governance is relatively centralized, relying on the validator committee to vote on contract delistings, lacking real-time risk monitoring, and having insufficient proactive constraints against market manipulation. In contrast, while centralized exchanges (CEX) may have drawbacks such as centralized management leading to hacker attacks, they often possess higher liquidity and more mature risk control systems compared to decentralized exchanges (DEX). They can detect abnormal trades in real-time through order book depth, price monitoring, and algorithmic risk control, limit leverage ratios, prevent large single orders from causing excessive market impact, and can pause trading or adjust margin ratios when necessary, thereby reducing risks for the treasury and users.
Hyperliquid's own platform token HYPE is undoubtedly an important window for observing market sentiment and platform confidence. During the JELLY token incident, the HYPE token fell nearly 20% in a single day. However, in the recent XPL incident, the HYPE token showed no significant fluctuations and even briefly reached a historical high of $50 on Wednesday.
At the WebX event held in Tokyo, Japan this week, BitMEX co-founder Arthur Hayes publicly endorsed HYPE again, predicting that HYPE would rise 126 times in the next three years. Hayes believes that Hyperliquid's future is closely tied to the expansion of stablecoins, describing Hyperliquid's strategy of integrating stablecoin liquidity and optimizing cross-chain settlement as the "main driver" of future growth.
Hayes predicts that by 2028, the global supply of stablecoins could reach $10 trillion, with Hyperliquid capturing 26.4% of that market.
In addition to endorsements from market leaders, Hyperliquid's robust trading volume growth may also be a significant factor supporting the price of its platform token HYPE.
Since May of this year, Hyperliquid has maintained a strong growth momentum. In that month, its total trading volume reached $256 billion, surpassing Robinhood's $192 billion for the first time. In June, Hyperliquid continued to lead with a trading volume of $231 billion compared to Robinhood's $193 billion.
Entering July, the platform's spot and perpetual contract trading volume climbed to $330.8 billion, 39% higher than Robinhood's $237.8 billion.
On August 25, benefiting from the surge in BTC and ETH deposits and trading driven by Hyperunit, Hyperliquid set a new 24-hour spot trading record, with a total trading volume reaching $3.4 billion, of which Bitcoin's trading volume alone was as high as $1.5 billion.
Having experienced both the JELLY and XPL incidents, Hyperliquid has exposed the inadequacies of decentralized platforms in risk control and liquidation mechanisms under low liquidity and high leverage environments. In the future, as DEXs pursue decentralization and user freedom, how to balance liquidity management, leverage control, and real-time risk control will be a key focus for the market and represents the most promising potential for the long-term sustainable development of DeFi platforms.
Related: Hyperliquid whales net $48 million from XPL surge of 200%, while also triggering manipulation accusations
Original: “Whales Disrupt DEX Market: Hyperliquid's XPL Soars as Shorts Get Wiped Out”
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