The price of HYPE, the native token of the Hyperliquid platform, fell by 8.5% on Wednesday morning, dropping from approximately $14.72 to $12.74.
The price of HYPE, the native token of the Hyperliquid platform, fell by 8.5% on Wednesday morning, dropping from approximately $14.72 to $12.74. This decline followed a significant liquidation event involving a whale, which left Hyperliquid's HLP (Hyperliquidity Provider) vault with a loss estimated at $4 million.
The HLP vault, integral to the Hyperliquid protocol—a decentralized perpetual futures exchange—enables users to deposit USDC and participate in market-making and liquidation strategies. The vault’s performance is tracked transparently on-chain, and its deposits are locked for four days.
According to blockchain analytics platform Lookonchain, a whale trader had previously deposited 15.23 million USDC to establish a long position in Ether, amassing a total of 160,234 ETH, valued at approximately $306.85 million. However, the position was liquidated, allowing the trader to withdraw 17.09 million USDC, resulting in a profit of around $1.86 million.
In the wake of the incident, some community members speculated about possible manipulation of the HLP vault, suggesting that someone may have engineered a scenario that triggered the liquidation event.
Hyperliquid, however, clarified that there had been no exploit or hack. They stated that the liquidation engine was unable to cope with the substantial size of the position taken by the trader.
Hyperliquid's statement on X confirmed that the user had unrealized profits and, upon withdrawal, reduced their margin, leading to the liquidation. The HLP vault's total value locked (TVL) amounts to $451 million, and despite this incident, its all-time profit and loss (P&L) remains at around $60 million.
In response to the situation, Hyperliquid announced plans to adjust the maximum leverage limits for BTC and ETH to 40x and 25x, respectively. This change aims to increase maintenance margin requirements for larger positions, thereby enhancing the buffer for backstop liquidations moving forward.
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