![](https://cdncloudcart.com/14855/files/image/monitor.svg?1739363876")
What unfolded yesterday was something akin to real-life cinema. Hyperliquid was under a coordinated attack by a whale who tried to manipulate the price of JELLY to exploit Hyperliquid's market-making mechanisms, leaving them with a toxic position that could have drained its entire HLP vault.
This wasn’t luck. The attacker planned every step to carry out a crypto market manipulation and exploit Hyperliquid’s weak spot. Here’s how it all went down and what it means for the platform moving forward.
What Exactly Happened
A whale with 124.6 million JELLY, worth $4.85 million, started the scheme by disposing of a huge portion of their holdings. At the same time, the whale opened a huge short position on the JELLY perpetuals and pulled his margin out of his Hyperliquid account. The price drop of JELLY triggered HLP's liquidity provider to develop a passive short position worth $15.3 million.
The same whale then repurchased JELLY, driving its price upward. The price increase triggered a "short squeeze," which forced HLP to close their short positions at elevated costs and resulted in a loss of nearly $12 million.
The coordinated activities led to a JELLY market capitalization increase from $10 million to $43 million in just one hour. Major centralized exchanges Binance and OKX established JELLY perpetual contracts during this market turmoil, which intensified the price fluctuations. Community members believed that these exchange listings served as deliberate attempts to intensify Hyperliquid's financial difficulties.
Here’s the sequence of events that unfolded:
|
Action |
Impact |
|
|
The Whale’s Strategy |
Dumped JELLY Tokens |
Sold 124.6 million JELLY ($4.85M), causing the price to drop. |
|
Opened a Massive Short Position |
Bet against JELLY using perpetual contracts, then withdrew margin (collateral) from Hyperliquid (HL). |
|
|
Triggered Hyperliquid’s Automated System |
Price drop forced HL’s liquidity pool (HLP) to take a $15.3M passive short position (auto-hedge against market moves). |
|
|
The Squeeze |
Whale Bought Back JELLY |
Repurchased JELLY, rapidly driving up its price. |
|
Short Squeeze Effect |
Rising prices forced HLP to close short positions at a $12M loss. |
|
|
Short Squeeze Definition |
When rising prices force short-sellers to buy back, amplifying price spikes. |
|
|
Market Chaos |
JELLY’s Market Cap Surge |
Market cap skyrocketed from 10M to 43M in 1 hour. |
|
Binance & OKX Listings |
Exchanges launched JELLY perpetual contracts during the chaos, worsening price volatility. |
|
|
Community Suspicions |
Exchange Listings as Sabotage? |
Many believe exchanges intentionally listed JELLY to deepen Hyperliquid’s financial crisis. |
|
HLP Vault Risk |
Hyperliquid’s liquidity pool (HLP) was nearly drained due to losses. |
How Hyperliquid Responded
The validators of Hyperliquid took action against suspicious market activities by delisting JELLY perpetual contracts. The platform declared its intention to reimburse users who were not involved in the manipulative scheme.
The cryptocurrency community strongly debated the incident that occurred. Several experts believed that Hyperliquid faced an attack from major exchanges who worked together to disrupt the DEX operations. The theory gained momentum because on-chain investigations showed that the wallets performing manipulation received money from Binance and OKX exchanges.
Here’s our perspective: While we support Hyperliquid’s innovative approach, their system’s design, lacking KYC checks and operating with full transparency left it vulnerable to such attacks. The attack was clearly malicious, but Hyperliquid could have taken stronger precautions. This mistake might be because of a lack of experience or not realizing how many bad players are out there.
That being said, the listing by CEXs, such as OKX and Binance of $JELLY perpetuals really forced Hyperliquid's hand. The main issue here is that Hyperliquid is not as decentralized as it claims to be. We view the reaction by Hyperliquid as the only viable option. Otherwise, we would have indeed very likely seen the $200M HLP vault absolutely wiped.
They were faced with too many bad decisions, and they opted for the lesser evil. This will without a shadow of a doubt lead to some negative backlash, but the real core of the issue here is what was outlined by ZachXBT.
He posted that during the Radiant hack, Hyperliquid did nothing for the funds deposited by DPRK on the platform, claiming they had no means of recourse.
This, in our opinion, is the larger problem and question that is posed. While we do think Hyperliquid made serious mistakes that allowed this situation, we also empathize with them. That being said, the whole fiasco does show why certain things can benefit from being centralized and can be better and more secure.
How XBTFX Stays Two Steps Ahead
Position caps are super important when trading illiquid tokens. Why? Without limits, whales can manipulate prices and destabilize markets. At XBTFX, we don’t just “set it and forget it.” We track cap levels 24/7, adjusting them in real time based on three factors:
- Liquidity
- Volatility
- Trading volume
This hands-on approach keeps markets stable and fair.
HLP deposits/withdrawals need structure, so the solution is to set clear rules for access. For example, require users to stake a minimum $HYPE amount and berify activity history. What this does is, it aligns incentives and reduces conflicts of interest. It’s a system we’re constantly improving at XBTFX because open markets shouldn’t mean unchecked risks.
Moreover, we aggregate pricing from several exchanges (never acting as counterparty). This makes sure prices reflect the entire market, not one glitchy order book. We also skip auto-withdrawals to retain control in edge cases. If something looks suspicious, we freeze it.
Malicious actors hate this, traders love it, and we support it.
Closing Thoughts
The Hyperliquid-JELLY incident really showed us how decentralized systems handle real-world crypto market manipulation. While it revealed weaknesses, it also proved why being a few steps ahead is important.
Platforms like XBTFX, which monitor limits in CFD trading and more, track liquidity, and control access, aren’t just avoiding risks, but prioritizing security to build lasting trust. It goes without saying that success isn’t about speed, but endurance. You’ll survive long-term when you start balancing innovation with protection.
What are Some Examples of Market Manipulation?
Crypto market manipulation is all about deceiving others about an asset’s value or activity. One example is pump and dump, which is when a group artificially inflates a cryptocurrency’s price through hype, then sells their holdings for profit once the price rises. Another method is spoofing, and it uses fake buy or sell orders to mislead traders into thinking there’s high demand or supply.
Can You Make $100 a Day with Crypto?
Yes, earning $100 daily with crypto is possible, but it’s neither easy nor guaranteed. Strategies like day trading (buying/selling rapidly), staking (earning rewards for holding coins), or yield farming (lending crypto for interest) can generate profits, but they require expertise, a clear plan, and careful risk management.
Is Market Manipulation Illegal?
Generally, market manipulation is considered illegal by regulators. However, it’s a little different when it comes to crypto because enforcement is less clear due to the gray area of regulation. Many crypto markets operate in unregulated or lightly regulated spaces, which allows manipulative practices to occur without penalties. However, things are changing now, with governments and regulators increasingly applying financial laws to crypto.
How is the Crypto Market Controlled?
The crypto market isn’t controlled by any single authority, but a variety of factors. For example, prices are shaped by supply and demand, investor behavior, and external factors like news or politics. Large holders (whales) or influential figures can sway prices by making big trades or spreading hype. Also, centralized exchanges impact the market through liquidity management, fee structures, or listing decisions. All of these (and more) factors control which way the crypto market swings.
