A recent incident in the cryptocurrency market has left Hyperliquid Vault HLP reeling from severe losses amounting to $12 million. The cause of this financial hit? A group of whales suspected of manipulating the price of $JELLYJELLY, a memecoin, in a coordinated effort that wreaked havoc on the market.
According to reports, these whales, who were allegedly backed by major cryptocurrency exchanges, collaborated to artificially inflate and then aggressively deflate the value of the token. This manipulation led to a staggering 385% spike in the token’s price, followed by a sharp drop shortly after.
Lookonchain, a blockchain analytics firm, discovered that one of the whales opened large short positions on Hyperliquid while simultaneously buying Jelly tokens off the platform. This strategic move resulted in a loss of $4.5 million for Hyperliquid’s HLP Vault, with total losses exceeding $6 million at one point.
The situation took a turn for the worse when another whale opened a long position, further driving up the price of JELLYJELLY. The whales eventually repurchased the token, causing Hyperliquid to suffer even bigger losses, totaling over $12 million.
Further investigation by on-chain investigator ZachXBT revealed that the wallet addresses linked to this manipulation were connected to prominent exchanges such as OKX, MEXC, Bybit, and Binance. This raised suspicions that these exchanges may have been complicit in the price manipulation scheme.
The repercussions of this manipulation extended beyond JELLYJELLY, affecting the value of Hyperliquid’s own token, HYPE, which dropped from $16 to around $13 as the market adjusted. However, after Hyperliquid took swift action by delisting JELLYJELLY and closing the short position, HYPE’s price surged by 25% to $14.5.
Despite the significant losses incurred, Hyperliquid is working diligently to stabilize its platform. The company has reimbursed most of the affected users and assured them of automatic compensation. Additionally, Hyperliquid reported that its HLP Vault still holds nearly $220 million in deposits and has seen a positive net income of $700,000 in the last 24 hours.
As the cryptocurrency market continues to grapple with issues of manipulation and volatility, incidents like these serve as a stark reminder of the risks involved in trading digital assets. Hyperliquid’s experience underscores the importance of vigilance and proactive measures to safeguard against such malicious activities in the future.