HyperLiquid, a leading decentralized exchange (DEX), is under scrutiny following its response to the JELLY short squeeze crisis. The platform delisted JELLY after nearly facing $230 million in losses, sparking widespread criticism from the crypto community.
Yesterday is a good reminder to stay humble, hungry, and focused on what matters: building a better financial system owned by the people. Hyperliquid is not perfect, but it will continue to iterate and grow through the collective efforts of builders, traders, and supporters.…
— Hyperliquid (@HyperliquidX) March 27, 2025
The abrupt decision raised fears of another FTX-style collapse, prompting HyperLiquid to release a statement emphasizing its commitment to financial integrity.
“Yesterday is a good reminder to stay humble, hungry, and focused on what matters: building a better financial system owned by the people. Users with JELLY long positions at the time of settlement will be refunded by the Foundation. This results in all JELLY traders being settled at a price advantageous to them, except flagged addresses,” HyperLiquid stated.
The platform has since introduced additional security measures, including stricter token delisting policies, open interest caps, and modifications to liquidation protocols to prevent similar incidents in the future. Despite these efforts, skepticism remains over whether these changes will effectively safeguard users from another crisis.
Can the Community Trust HyperLiquid?
The controversy has fueled debates over whether HyperLiquid operates as a truly decentralized exchange. The decision to delist JELLY and freeze funds contradicts DeFi’s core principles, raising concerns about centralized control.
Blatant attacks and winning fair and square are two completely different situations:
— Omnia.hl π (@0xOmnia) March 27, 2025
See JELLY situation vs BTC/ETH situation from earlier this month
Crypto investigator ZachXBT called out HyperLiquid for its selective intervention, highlighting the inconsistency in its actions. He pointed to a past security breach linked to North Korean actors, which the firm dismissed at the time. However, HyperLiquid’s rapid response to the JELLY squeeze demonstrated its ability to act decisively when its own stability was at stake.
One could argue both DPRK and the Jelly trader both simply used the protocol as its intended.
— ZachXBT (@zachxbt) March 27, 2025
You are comparing apples to oranges as a front end block is not comparable to forcing closing a position.
If something like that could be done for JELLY it likely should have been…
“HyperLiquid has recently seen illicit flows [and] said it’s decentralized, so it cannot do anything. Now, HyperLiquid made a centralized decision to quickly close the position at an arbitrary price for an entity using the protocol as intended. If something like that could be done for JELLY, it likely should have been done for both,“ ZachXBT remarked.
Also Read: Is Hyperliquid the Next FTX? Crypto Leaders Sound Alarm Over Transparency and Risk
While HyperLiquid’s HYPE token has rebounded, trust in the platform remains fragile. The JELLY incident serves as a stark reminder that in DeFi, actions speak louder than words. Moving forward, HyperLiquid must align its policies with its decentralized ethos to regain credibility within the crypto community.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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