Author: Scof, ChainCatcher
Editor: TB, ChainCatcher
After being exploited by a 50x leverage whale mechanism vulnerability last time, HyperLiquid has encountered another incident.
The method is identical and transparently executed, but this time the target is the meme coin $JELLYJELLY, which has far less liquidity than ETH.
Despite the platform's mechanism adjustments after the last event, the protection remains weak, and HyperLiquid ultimately paid the price for its negligence and arrogance.
Event Overview
Last night, the decentralized contract platform HyperLiquid was subjected to a carefully planned on-chain hunting. Surrounding the $JELLYJELLY token, someone used methods like opening short positions, manipulating token prices, and inducing system liquidation to jointly attack the platform's treasury, causing widespread attention.
The event was triggered by a massive short position: address 0xde9...f5c91 opened a $4.08 million $JELLYJELLY short position at $0.0095, investing 3.5 million USDC as margin, essentially a "bait" to induce system takeover.
Subsequently, another address Hc8gN...WRcwq dumped on the spot market, creating short-side profits. The short position holder withdrew most of the margin, causing the platform to automatically take over the position and transfer risk to the treasury.
The operator then reversed course, buying large amounts of $JELLYJELLY to drive up the price, causing massive losses on the system's short positions. At this point, retail investors began withdrawing funds, increasing treasury pressure, and lowering liquidation prices. At its peak, the treasury had unrealized losses exceeding $10 million, with TVL decreasing by about $20 million. According to crypto KOL @ai_9684xtpa's analysis, if the token price rises to $0.17, the treasury might be force-liquidated, facing potential losses of up to $240 million.
According to monitoring, the pumping address previously held 120 million $JELLYJELLY tokens (approximately $5 million), making it the largest on-chain holder. The address's funds appear to be depleted, causing significant price volatility.
Community Reaction
This shocking event quickly sparked widespread discussion on Twitter.
Crypto KOL @thecryptoskanda first spoke up, calling for "Binance to list $JELLYJELLY". Shortly after, Binance co-founder He Yi retweeted and expressed approval. Minutes later, Binance officially announced the listing of $JELLYJELLY perpetual contracts tomorrow.
Meanwhile, HyperLiquid officially chose to "pull the plug", directly delisting $JELLYJELLY and profiting $703,000 by liquidating short positions before delisting. Although they claimed this was a committee vote, the move also sparked more controversy.
BitMEX founder Arthur Hayes immediately stated: "HyperLiquid is no longer decentralized" and predicted HYPE would continue to weaken, ultimately returning to its origin.
Sonic Labs co-founder Andre Cronje also criticized HyperLiquid's leverage mechanism on X platform. He believes leverage multiples should not be fixed functions but dynamically adjusted based on available liquidity and actual volatility. For example: small positions could get 1000x leverage, while large positions should be limited to 1.2x. In DeFi, fixed leverage is an extremely dangerous design.
On-chain detective ZachXBT angrily spoke out, criticizing HyperLiquid's official manipulation of prices and turning a blind eye to hackers' money laundering activities on the platform.
After the incident, according to HyperLiquid's website, its HLP TVL briefly dropped to $197 million. It was previously reported to be $240 million.
Suddenly, public opinion completely reversed, and HyperLiquid, once praised by believers as the "on-chain Binance", is rapidly losing market trust.
A CEX Disguised as a DEX?
Although this hunting event concluded with HyperLiquid removing $JELLYJELLY and temporarily stopping the bleeding, and the community achieved a "practical test" of mechanism vulnerabilities in the short term, the underlying issues remain unresolved.
For instance, after the first mechanism attack, did the platform truly assess the imbalance risks between leverage and liquidity? When facing this liquidation crisis, why did they choose to delist the trading pair in an almost centralized manner instead of relying on preset risk control mechanisms?
From another perspective, if the platform claims to adhere to decentralization, why can they "shut down" with a single click at critical moments? If "survival takes priority", what essential difference remains between HyperLiquid and a CEX?
These unresolved questions point to a deeper dilemma: when decentralized platforms face extreme market impacts, should code speak, or should backend teams make decisions?
As users, we believe on-chain trading is the future, but whether HyperLiquid can reach that point remains uncertain. Perhaps it's an experiment, perhaps it will survive to become a new standard. But today, its decentralization narrative stands at the edge of a cliff.
