Hyperliquid’s native token, HYPE, experienced an 8.5% drop on Wednesday morning following a major whale liquidation event. The token’s price fell from approximately $14.04 to $12.84 before making a slight recovery, according to The Block’s Hyperliquid Price page.
The liquidation event also left the Hyperliquid Provider (HLP) vault with a $4 million loss. The HLP vault is a crucial component of Hyperliquid’s decentralized perpetual futures exchange, which operates on its own Layer 1 blockchain. This community-owned vault facilitates market-making and liquidation strategies, allowing users to deposit USDC and share in profits or losses proportionally.
Whale Activity and Market Impact
Blockchain analytics platform Lookonchain reported that a Hyperliquid whale had deposited 15.23 million USDC to establish a long position in Ethereum, amassing 160,234 ETH ($306.85 million). However, the trader was liquidated and managed to withdraw 17.09 million USDC, netting a profit of $1.86 million. This event significantly impacted the HLP vault, contributing to its $4 million loss—roughly 1% of its $451 million total value locked (TVL).
This whale just deposited another 10M $USDC into #Hyperliquid to place a limited order at $1921.
— Lookonchain (@lookonchain) March 12, 2025
His $ETH long position has reached 141,013 $ETH($271.6M)!
Entry price: $1,900.28
Liquidation price: $1,805
Unrealized profit: $3.65Mhttps://t.co/AmwJ2lt8Fm pic.twitter.com/YHKKkJ5TAN
Some analysts speculated that the whale strategically withdrew equity from the HLP vault, triggering an auto-liquidation event that forced the HLP to take the opposing side of the trade. This mechanism led to losses for the vault and downward pressure on HYPE’s price.
Hyperliquid’s Response and Risk Mitigation
Hyperliquid confirmed that there was no exploit or hack involved in the event. The protocol’s liquidation engine simply struggled to handle the position’s size, leading to the losses. The team addressed concerns by adjusting leverage limits to mitigate future risks.
“This user had unrealized PNL, withdrew, which lowered their margin, and was liquidated. They ended with ~$1.8M in PNL. HLP lost ~$4M over the past 24h. HLP’s all-time PNL remains at ~$60M,” Hyperliquid stated on X. “Max leverage will be updated for BTC and ETH to 40x and 25x respectively to increase maintenance margin requirements for larger positions.”
Also Read: Hyperliquid (HYPE) Surges 22% This Month – Can It Break $30?
The recent event underscores the inherent risks in market-making strategies and highlights the need for stricter safeguards against liquidation-related losses.
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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