The HYPE cryptocurrency created by Hyperliquid, a decentralized perpetual futures platform, recently encountered difficulties stemming from a manipulation controversy involving JELLYJELLY. Hyperliquid made the decision to delist JELLYJELLY after a trader manipulated its price, which resulted in a $12 million unrealized loss for Hyperliquid’s vault.
How did this occur? The manipulator noticed a trader shorting JELLYJELLY, sold it on decentralized exchanges, and then went long, straining the funds available in Hyperliquid’s vault.
This incident raises questions about the recovery potential of HYPE crypto, which saw a 22% decline following these events.
The Sorting Out of the Manipulation and Market Reaction to HYPE Crypto
The manipulation ignited when wallet ‘0xde96’ initiated a $6 million short position on JELLYJELLY. Concurrently, a whale caused prices to plummet on decentralized exchanges, forcing Hyperliquid’s liquidity vault to sustain the burden of the short position. Another wallet ‘0x20e8’ then took a long position on the token, driving the price upward and amplifying the vault’s losses to $12 million.
Address 0xde9…c91 withdrew margin, offloading 398M $JELLY shorts onto Hyperliquid. As $JELLY surged to $0.04, its vault incurred a $10M unrealized loss.
(Translation: The specific manipulation has drawn attention to the risks involved in the market.)
Following the incident, Hyperliquid promptly halted trading and decided to delist the contract, pointing to ‘suspicious market activity’. They managed to close out 392 million JELLYJELLY at $0.0095, resulting in a $703,000 profit for the vault while the price faced significant challenges, dropping by 22% before a minor recovery.
This rapid response seemingly restored some level of confidence, yet it unveiled weaknesses within Hyperliquid’s operational structure.
JELLYJELLY, a meme-based coin on the Solana blockchain, suffered a roller-coaster in market valuation, peaking near $50 million before intervention.
Hyperliquid suspended trading of JELLYJELLY, ensuring to reimburse a majority of its users through the Hyper Foundation.
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The Pros and Cons: Can HYPE Recover?
On another note, Binance and OKX have also decided to list JELLYJELLY futures amid this turmoil, raising suspicion of competitive sabotage.
Furthermore, it has been noted that wallets involved in the manipulation received funding from Binance, suggesting deeper entanglements.
It would be even funnier if this outcome happened because both JELLY manipulators were freshly funded via Binance.
(Translation: Speculation around manipulation indicates serious market vulnerabilities.)
The listings by Binance and OKX overlapped with Hyperliquid’s attempts to stabilize, and had the market cap of JELLYJELLY escalated to $150 million, the vault faced a risk of total liquidation—a scenario narrowly avoided.
Currently, Hyperliquid has committed to implementing technical upgrades to mitigate future risks, including increased margin requirements for certain positions.
Market sentiment regarding HYPE crypto’s recovery is polarized; some view Hyperliquid’s swift actions as resilient, while others criticize its centralized practices evidenced by the manual intervention regarding JELLYJELLY pricing and delisting decisions.
Following the incident, Hyperliquid’s total value locked plummeted from $283 million to $190 million, pinpointing that HYPE’s road to recovery involves regaining user trust and demonstrating resistance to market manipulation. The robust competition from Binance and OKX will further amplify the stakes, but how Hyperliquid navigates this challenges will dictate its future.
Ultimately, as the adage suggests, whatever drops can also rise.
