This week's hot topic: A 50x leveraged whale liquidation caused HLP to take a $4 million loss
Author: Alex Liu, Foresight News
Illustration: Raven, Foresight News
Note: The "Weekly Trending" statistics are based on user search results on Foresight News from last Friday to this Thursday (March 7 to March 13), and the capitalization of the same concepts has been consolidated.
Hyperliquid Controversy
This week, "Hyperliquid" rose to second place on the hot search list, mainly because its mechanism was exploited, causing the HLP (a market-making fund composed of user funds) to lose $4 million, sparking various controversies.
The incident was triggered by a whale who had previously profited from 50x leveraged trading on "Hyperliquid" and opened a $270 million ETH long position, with the liquidation price only $23 different from the opening price. They then added $10 million USDC as margin, reducing the liquidation price of their ETH position from $1,877 to $1,805. After profiting, the user first withdrew the principal and most of the profits, and then actively liquidated the remaining 160,234.18 ETH (worth about $306 million) long position by compressing the liquidation price.
Due to the large size of the liquidated position, to avoid a significant impact on the market, the Hyperliquid platform's mechanism is for HLP (Hyperliquid Liquidity Providers) to take over these positions at $1,915 and then gradually close them. The 160,000 ETH positions taken over by HLP were gradually closed in small amounts, resulting in a total loss of about $4 million.
Afterwards, the Hyperliquid official stated that this incident was not due to a protocol vulnerability or a hacker attack. The user withdrew the margin while still having unrealized profits, which reduced their margin ratio and led to their liquidation, ultimately earning them about $1.8 million in profits. Meanwhile, HLP (Hyperliquid Liquidity Providers) lost about $4 million in the past 24 hours, but their historical total profit still stands at around $60 million. The official emphasized that the HLP strategy is not risk-free. At the same time, the platform has updated the maximum leverage ratios for BTC and ETH to 40x and 25x respectively, to increase the maintenance margin requirements for large positions and provide better buffer for their liquidation.
Additionally, Hyperliquid will implement a 20% margin rate requirement for "margin transfers" starting March 15.
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