Hyperliquid, a decentralized perpetual futures exchange, witnessed its second-largest single-day outflow on March 12, following a massive Ethereum whale liquidation that resulted in a $4 million bad loan within the HLP Vault. The incident triggered panic among investors, leading to 16 large withdrawals and an overall outflow of $166 million.
Whale’s 50x Leverage Bet Ends in Disaster
A prominent trader placed an aggressive long position of 175,179 ETH—worth approximately $335.6 million—using 50x leverage. The whale initially deposited $15.23 million in USDC to execute the trade. However, as Ethereum’s price moved against the position, the trader managed to close only 14,945 ETH worth $28.7 million, securing a modest $1.86 million profit. The remaining 160,234 ETH—valued at $306.85 million—was force-liquidated, leaving the HLP Vault with a $4 million loss.
Crypto analysts speculate that the whale’s withdrawals may have inadvertently triggered an auto-liquidation event. The HLP Vault, which operates as a liquidity provider by taking the opposite side of trades, failed to absorb the losses, exacerbating market fears.
HYPE Token Drops Amid Exploit Rumors
In the aftermath of the liquidation, Hyperliquid’s native token, HYPE, dropped over 8%, sliding from $14.04 to $12.84. This decline reflected growing concerns about the vault’s stability. Some traders suspected a possible exploit, theorizing that the whale might have manipulated Hyperliquid’s market-making strategy, which distributes trading fees, funding payments, and liquidations among liquidity providers.
However, Hyperliquid swiftly denied these allegations, clarifying that the liquidation engine struggled to handle the sheer size of the position but that no security breach or protocol compromise had occurred.
Also Read: Ethereum Price Crashes Below Key Support: Is the Bull Market Over?
Can Hyperliquid Restore Investor Confidence?
With Hyperliquid’s vault losing 1% of its $451 million total value locked (TVL), the exchange now faces an uphill battle in regaining investor trust. Market participants are closely monitoring whether Hyperliquid can implement risk mitigation measures to prevent similar incidents and stabilize its ecosystem following this turbulence.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of CoinBrief.io. Before making any investment decisions, you should always conduct your own research. Coin Brief is not responsible for any financial losses.
