Tonight, a liquidity crisis caused by Memecoin $JELLY, which is affiliated with JellyJelly created by Lessin, the vice president of product at Facebook some time ago, has pushed the leading derivative DEX Hyperliquid to the center of the storm. From whales manipulating prices, CEX targeted sniping, to the protocol's emergency "pulling the plug" to save itself, this crisis not only exposed the governance weaknesses of decentralized protocols, but also evolved into a head-on confrontation between CEX and Perp DEX.
Hyperliquidity Unplug the Network Cable
Tonight, the giant whales once again engaged in an exciting offensive and defensive battle on the chain. The address "0x20e8" opened a long order of 250 million $JELLY in the price range of 0.0095 at 8:53 on the 26th ( equivalent to approximately 2.1 million US dollars at this time ).
Ten minutes later, at around 9 p.m. on the 26th, the address "0xde95" first opened a short position of 398 million $JELLY on Hyperliquid perpetual futures ( equivalent to approximately 4.5 million US dollars at this time ). At the same time, they purchased $JELLY spot on the chain, artificially raising the spot price, and then the address removed the margin in the short position.
This move triggered the HLP mechanism. Since HLP's market making strategy calculates fair prices by integrating Hyperliquid and mainstream CEX's tick data, and executes production and execution strategies to provide 24/7 liquidity, when the $JELLY price falls, HLP will act as a counterparty during the liquidation period and inherit the airdrop position "about US$5 million at this time."
The address then continued to buy back $JELLY, and due to low liquidity, the price skyrocketed. At this time, HLP had a passive short position of 398 million $JELLY (which was worth approximately $15.3 million at this time due to the increase in token prices), which had caused HLP to lose nearly $12 million. According to on-chain data analyst @ai_9684xtpa, if the counterparty raises the price of the currency to around $0.17, Hyperliquid Vault will face liquidation and lose the $240 million it currently holds. At this time, the price of the currency fluctuates between about 0.035-0.045 US dollars. It only takes about three times, and the 240 million US dollars in one of Hyperliquid’s treasuries will disappear.
Well-known crypto KOL Crypto Skanda "@thecryptoskanda" added fuel to the fire on Twitter, suggesting that Binance launch JELLY spot trading, or simply claiming that it is considering launching JELLY trading, and using its own influence to further increase the price of JELLY to liquidate Hyperliquid, a competitor. In response, Binance co-founder He Yi said, "OK, got it."
Around 11 p.m. on the 26th, community members discovered that the K-line of the $JELLY token on HyperLiquid stopped updating, and it was suspected that $JELLY had been delisted. As retail investors and large investors collectively "encircled" the HyperLiquid project, the funds in the treasury have been reduced to US$50 million in order to reduce risks, and the liquidation price has also dropped to US$0.14.
Ten minutes later, OKX and Binance announced the launch of the JELLYJELLY perpetual contract. Hyperliquid then responded on Discord, saying that after discovering suspicious market activities, the validator committee voted to delist the JELLY perpetual contract. Except for marked addresses, all user losses will be fully compensated by the Hyper Foundation. This means that after the so-called "vote", they set a price of $0.0095 to directly liquidate the on-chain behavior. This move also completely angered the community members. "DEX" became "CEX" overnight, and Hyperliquid even made a profit of $700,000 in this liquidation.
CZ quoted his previous tweet about "DEX is not as good as CEX" on social media and wrote, "I know I am not smart. I will admit when I don't understand, and I often feel that those powerful people must have mastered some tricks that I don't know to do things that I can't do. But occasionally, I will find that the most basic rules still apply."
Arthur Hayes even believes that Hyperliquid’s inability to handle the JELLY incident shows that it is not decentralized, and traders do not care whether it is decentralized or not. He also believes that HYPE will soon fall back to the starting point.
The impact of this incident is still continuing to ferment. Whether it is the previous DEX involvement in insider trading or the recent forced decision of the "guessing result" by PolyMarket's big players, the leakage of CEX customer information or the manipulation of CEX prices by market makers, it reminds cryptocurrency practitioners almost every day that there are still many problems that need to be solved. BlockBeats will continue to pay attention to the development of the incident.
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