TLDR
- A whale manipulated JELLY’s price on Hyperliquid, creating a $12M unrealized loss for the HLP vault
- Hyperliquid delisted JELLY perps and adjusted oracle prices to protect the platform, making $700K profit
- Critics, including Bitget CEO Gracy Chen, compared Hyperliquid to “FTX 2.0”
- The incident raised questions about Hyperliquid’s true decentralization
- HLP vault value dropped from $283M to $190M following the attack
On March 26, 2025, Hyperliquid faced yet another whale attack, this time targeting the JELLY token. The crisis began when a whale opened an $8 million short position on JELLY through the decentralized exchange. This position was equivalent to 126 million JELLY tokens.
The crazy squeeze caused Hyperliquidity Provider (HLP) to lose ~$12M in the past 24 hours!
0xde95 shorted $JELLY on @HyperliquidX and removed the margin, causing HLP to passively liquidate $4.5M short positions.
A newly created wallet "0x20e8" opened a long position on… pic.twitter.com/fagfO1UPJP
— Lookonchain (@lookonchain) March 26, 2025
The attacker then removed the necessary margin collateral. This triggered an automatic liquidation, forcing Hyperliquid’s HLP vault to take over the massive short position.
What happened next was a classic price manipulation. The same wallet began buying large amounts of JELLY on the spot market. This pushed JELLY’s market cap from $10 million to over $50 million in less than an hour.
The price surge created a short squeeze. HLP faced an unrealized loss of up to $12 million as JELLY’s price climbed. According to analyst Abhi, if JELLY’s market cap had reached $150 million, Hyperliquid could have faced complete insolvency.
During this chaos, another wallet opened a large long position. This wallet quickly gained an unrealized profit of about $8.2 million as JELLY’s price continued to rise.
Exchange Response
Centralized exchanges like Binance and OKX quickly listed JELLY perpetual futures. This added more fuel to the trading activity and price movements.
Some rumors suggested the attacking wallets might be Binance-funded. While these claims remain unverified, they point to tensions between centralized exchanges and newer platforms like Hyperliquid.
Facing this crisis, Hyperliquid took quick action. The validator group held an emergency meeting. They voted to delist JELLY perpetual futures from the platform.
After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps.
All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data. There is no…
— Hyperliquid (@HyperliquidX) March 26, 2025
They also adjusted JELLY’s oracle price to $0.0095 per token. All open positions related to JELLY were closed at this price.
These actions allowed HLP to avoid major losses. In fact, the vault secured a net profit of $700,000. Hyper Foundation promised to compensate affected users, except for wallets involved in the manipulation.
Centralization Concerns
While many praised Hyperliquid’s quick response, others raised concerns. The decision to delist JELLY and adjust its price seemed to contradict the idea of a truly decentralized exchange.
Hyperliquid defended its actions on social media platform X. They said validators had a responsibility to intervene to protect system integrity. However, they admitted they needed more transparency in their voting process.
Gracy Chen, CEO of Bitget, was among the harshest critics. She compared Hyperliquid to “FTX 2.0,” referring to the failed exchange run by Sam Bankman-Fried. Chen called Hyperliquid’s handling of the situation “immature, unethical, and unprofessional.”
#Hyperliquid may be on track to become #FTX 2.0.
The way it handled the $JELLY incident was immature, unethical, and unprofessional, triggering user losses and casting serious doubts over its integrity. Despite presenting itself as an innovative decentralized exchange with a…
— Gracy Chen @Bitget (@GracyBitget) March 26, 2025
She pointed out problems with Hyperliquid’s mixed vault mechanism. This structure, she argued, puts users at a disadvantage. Combined with a lack of KYC/AML compliance, it raises serious regulatory concerns.
The attack had real financial impact. The total value of the HLP fund dropped from $283 million before the attack to $190 million afterward. Meanwhile, Hyperliquid’s HYPE token fell 6% in value.
The incident highlights the challenge Hyperliquid faces. They must balance true decentralization with the need to prevent market manipulation. The listing of an illiquid token like JELLY, whose supply can be controlled through decentralized exchanges, created a vulnerability that was exploited.
This serves as a harsh lesson for the platform. It shows the risks of listing low-cap tokens on a decentralized exchange without proper safeguards. It also raises questions about what “decentralized” really means when validators can step in to change prices and delist tokens.
As the crypto community watches, Hyperliquid must now rebuild trust. Their response to this crisis will shape perceptions of whether they truly offer a decentralized alternative or are simply repeating the mistakes of past centralized platforms.
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