Hyperliquid Price Plummets Following the JELLY Incident
Hyperliquid, the decentralized crypto trading platform, was gaining popularity among investors over centralized platforms. However, recent incidents have significantly tarnished its reputation and performance, raising security and transparency concerns.
It all started with whales exploiting Hyperliquid’s liquidation system. An initial incident saw a Bitcoin trader moving a $4 million loss by withdrawing their collateral mid-transaction. Similar cases followed, fueling concerns about the platform’s security.
The most recent episode, dubbed the “JELLY” incident, left a lasting impact. A trader deposited $7 million across three accounts and engaged in leveraged operations. Two accounts took long positions while the third was short. This combination led to a 400% surge in the price of JELLY, liquidating the short position and causing losses to the Hyperliquid Provider Vault (HLP).
In response, Hyperliquid decided to delist the JELLY token, citing suspicious activity. While the foundation pledged to compensate affected users, the Hyperliquid price took a severe hit due to some account limitations.
Community Criticisms
This incident drew attention and criticism from the global crypto community. Several industry leaders expressed their disappointment with the platform, going as far as labeling it irresponsible and comparing it to FTX.
More importantly, community criticisms emerged regarding the compensation of JELLY incident victims. Investors pointed out bias and favouritism in handling certain accounts.
“Users with long positions on JELLY at the time of settlement will be reimbursed by the Foundation as if their position settled at the closing price of 0.037555. This has the effect of providing all JELLY traders with a settlement at an advantageous price, except for flagged addresses,” stated Hyperliquid.
The CEO of Bitget also highlighted structural flaws, concerns echoed by Arthur Hayes, the co-founder of BitMEX, who also questioned Hyperliquid’s decentralization claims.
Hyperliquid Implements New Risk Management Measures
In response to this crisis, Hyperliquid has taken strict measures to prevent such events. In an announcement on X, the team revealed four major updates to the risk management policy:
- The liquidation compartment will now have a tighter cap, holding only a small portion of the total HLP account value.
- Rebalancing frequency has been reduced.
- The liquidation process will be managed by a more sophisticated system.
- Changes have been made to the Automatic Deleveraging (ADL) operation.
- The Open Interest (OI) policy will better reflect current market conditions.
- Validators will be able to remove underperforming digital assets through on-chain voting.
Future Outlook for HYPE Token Price
These whale-related incidents have exposed the vulnerabilities of Hyperliquid’s DeFi trading models and other similar platforms. The HYPE token has faced extreme conditions and significant price declines amid community criticism and rejection.
Nevertheless, the platform is still operational. Some experts believe that the new risk management measures could improve investor sentiment towards the platform. However, the downtrend on Hyperliquid is likely to persist for some time, impacting its price.
Should You Buy HYPE ?
As discussed in one of our previous articles, HYPE seems to be on a downward path. This should push it towards the demand zone between $11.75 and $10.40. If HYPE fails to bounce back from this zone and the market shows no bullish signals, it may be wise to wait for it to find its next support.
The zone between $5.5 and $8 could be crucial for a trend reversal. This would correspond to a drop of over 80% from its peak at $35.
To acquire HYPE, head over to Weex, an exchange perfect for curious and novice investors. Here is a clear guide on buying HYPE on this growing platform:
- Create a Weex AccountVisit the official Weex website and sign up with your email or phone number. Confirm via the code received and activate two-factor authentication (2FA) to secure your profile.
- Verify Your Identity (KYC)Complete KYC verification by submitting an ID and, if required, proof of address. This quick step is essential to unlock all features.
- Add FundsVisit “Deposit” and top up your wallet with cryptos (USDT, BTC, etc.) or fiat (credit/debit card, bank transfer, subject to availability). Follow the instructions to complete.
- Find the HYPE MarketAccess “Spot Trading,” search for “HYPE” in the dedicated bar, and select the HYPE/USDT pair to open the interface.
- Make the PurchaseChoose a market order for instant purchase or a limit order to set a specific price. Specify the desired amount of HYPE, review, and confirm.
