🧐POPCAT Crash Comprehensive Analysis｜Not a Spike, but a Precision Attack: Hyperliquid Penetrated, HLP Lost $4.9 Million!
Last night, $POPCAT suddenly plummeted, seemingly just another ordinary long liquidation, but from on-chain behavior, order book structure to liquidation paths, this looks more like a premeditated liquidity system attack.
This doesn't seem to be the first time, and it probably won't be the last!
So you see: we may face market risks from places we can hardly imagine, just like last night's feint, you didn't do anything wrong, but your money could suddenly disappear in just a few seconds!
In the highly transparent yet highly manipulable environment of perpetual DEX, such events are bound to erupt sooner or later.
- Event Review: A Premeditated Operation!
1️⃣ Advance Preparation of Funds and Address Structure:
About 13 hours before the event, the attacker withdrew 3 million USDC from OKX, then immediately split it into 19 addresses.
This splitting behavior usually serves two purposes:
Avoiding risk control
Obscuring positions and activating the funding cap for long positions
2️⃣ Continuously Building Huge Long Exposure:
The attacker kept going long on POPCAT on HL, pushing the total exposure to a scale of $20-30 million.
In low liquidity assets, this is enough to leverage the entire market structure.
3️⃣ Creating False Demand: A Large Buy Wall at $0.21:
To create the effect of "real buying driving the market up," he placed a massive buy wall of about $30 million at the $0.21 position.
The purpose of this behavior is very clear:
To build false depth, attracting retail, quant, and trend strategies to collectively go long. The order book visually shows "strong support," thereby increasing market confidence.
4️⃣ A large number of retail and quant traders see the buy wall, mistakenly believing "someone is building a large position," and start to go long.
5️⃣ Sudden Wall Removal → Price Structure Collapses Instantly:
Without any warning, the attacker instantly removed the buy wall.
With POPCAT's depth not being very deep, the price immediately fell freely.
6️⃣ Attacker's Own Position Self-Destructs → Collateral Completely Wiped Out:
The attacker's long position was completely liquidated in an instant, with $3 million in collateral going to zero—but this was not the result he wanted to avoid; on the contrary, it was part of the attack.
7️⃣ HLP Forced to Take on Bad Debt → Loss of $4.9 Million:
The attacker's exposure was so large that the liquidation slippage far exceeded acceptable limits.
Liquidation was no longer absorbed by the market but transferred to the platform's liquidity pool (HLP): HLP automatically took on the exposure, ultimately losing about $4.9 million.
8️⃣ After the event, the platform had to manually intervene in the market and close remaining risk exposures.
9️⃣ Later, Hyperliquid temporarily "paused" the Arbitrum bridge (withdrawals and deposits within the exchange were unaffected).
The overall chain of events is very clear:
In simple terms, the attacker used real capital as bait, manipulating false depth + exploiting flaws in the liquidation mechanism to "transfer" the real losses to LPs.
This is the fundamental reason why perpetual DEX can be attacked.
- Why Does This Not Seem Like a "Normal Liquidation"?
Looking at several key points:
1️⃣ 19 wallets splitting funds → Professional Preparation
2️⃣ Large buy wall creating false depth → Deliberate Inducement
3️⃣ Instant order cancellation triggering chain liquidations → Deep Understanding of the Mechanism
4️⃣ The attacker's capital going to zero is not the point → He is betting on "making LPs lose for me"
5️⃣ The platform experienced a third market incident → Consistent Logic
This is typical: using real capital to create false demand → tearing apart the liquidation mechanism → forcing the liquidity pool to absorb bad debt in an arbitrage attack.
- Deep Issues: The Structural Weakness of Decentralized Perpetuals Exposed Again
The severity of this incident is not because someone lost millions, nor because HLP absorbed $4.9 million in bad debt, but because it hit the biggest pain point of all Perp DEX:
The general structural weakness of decentralized perpetuals has been proven to be exploitable by attackers: low liquidity assets + high leverage + manipulable order book depth = a natural attack surface!
① Low Liquidity Assets (Long-tail tokens)
POPCAT has limited depth, and the cost of manipulation is low.
② High Leverage (20-30x)
The cost of attack can be exponentially amplified.
③ Liquidation Mechanism Relies on Order Book Depth (Orderbook or Hybrid Structure)
As long as the order book is manipulated, the liquidation path can be changed, allowing the system to bear bad debt.
When these three factors overlap, they create a natural attack surface.
GMX, Drift, MUX, Vela, and even early versions of dydx have all encountered similar issues.
In fact, you will find a cruel but true rule:
Attackers only need hundreds of thousands to millions of dollars to cause the protocol to lose millions or more.
This poses a long-term risk to the entire Perp DEX industry.
- Risk Warnings and Reflections: This is an Inevitable Path, but the Cost is High
HL burst onto the scene, Aster with a hundredfold return! The explosion of perpetual DEX this year should be an inevitable event, accepted by everyone, fundamentally because it brings higher transparency, permissionless market-making methods, and truly on-chain trading logic.
But transparency means "verifiable," verifiable also means "can be rehearsed," and being rehearsed means "can be attacked."
Here are some insights this incident has given me:
1️⃣ Insights for Traders:
The longer the tail asset, the easier it is to manipulate;
Buy walls and sell walls are never trustworthy on-chain;
The more volatile the place, the more attractive it is to manipulators;
The risks of perpetual DEX come not only from prices but from "the system structure itself."
2️⃣ Insights for LPs:
The returns from perpetual protocols are never "free"; they correspond to bearing bad debt risks.
As long as high leverage scenarios exist, bad debt is an inevitable event;
HLP, GLP, vLP are essentially "liquidation counterparties";
Once extreme market conditions arise, LPs may bear asymmetrical losses;
3️⃣ Insights for the Industry:
Such events will not make Perp DEX disappear, but will force them to:
Adjust asset selection
Reconstruct liquidation mechanisms
Introduce more anti-manipulation measures
Update price source mechanisms
Introduce insurance funds or risk control supplementary pools
Limit false depth and large order cancellations
In a sense, such events are a necessary stage of industry growth—painful but necessary. So I say, this is also a good thing; such events will force Perp DEX to rethink systemic risk control. How should I put it? It’s a necessary path!
- Conclusion: Every Crash May Be Precisely Utilized and Manipulated; We Cannot Predict Risks, but We Can Predict Ourselves!
The crash of POPCAT is just a small fluctuation in asset prices;
But the attack logic behind it reminds us again:
Decentralized perpetuals are not purely a technical game, but a comprehensive battlefield of mechanisms, confrontation, and incentives.
The real risks often do not come from the market but from the moment the system is "precisely utilized."
Every crash may be precisely utilized and manipulated; we cannot predict where these risks are. What we need to do is to understand ourselves better, know what we are not good at, and know what we do not know is very important. If we don’t know, we shouldn’t go there. I can earn a little less, but I must not lose everything at once! The principal is always the most important!
You must deeply believe and understand the true meaning of this statement!
May all participants enhance their awareness in such events, rather than just bear the costs.
Data and images in this article are from @arkham, thanks!
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