Hyperliquid suffered its second whale manipulation event in two weeks on Wednesday as a user shorted Solana memecoin JELLYJELLY on the decentralized exchange, forcing the protocol to assume hefty losses shortly after.
Wallet address "0xde96" opened a short position on JELLYJELLY while a whale dumped the memecoin on DEXs, which crashed the token's price and forced Hyperliquid's HLP vault to take over the initial short position. The newly created wallet "0x20e8" then longed the token. The strategy exacerbated HLP’s unrealized losses to about $12 million, according to Lookonchain data.
While Hyperliquid raced to contain the situation, some users on social media suggested centralized exchanges that compete with Hyperliquid should list JELLYJELLY futures contract to incentivize more trading and possibly cripple the rival exchange. There was speculation that if the memecoin's price hit a certain level, it could wipe out the HLP vault.
Within an hour or so, Binance and OKX listed perpetual futures trading for JELLYJELLY. However, at the same time, Hyperliquid halted JELLYJELLY trading and froze the contract. "After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps," the protocol announced.
"All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data," said the team, adding that "HLP's 24-hour pnl as of writing is approximately 700k USDC. Technical improvements will be made, and the network will grow stronger as a result of lessons learned. More details will be shared shortly."
Hyperliquid's native token dropped as much as 22% during the incident, according to The Block's HYPE price data, but pared some of those losses to trade down about 10% at publication time.
JELLYJELLY is a memecoin created by Iqram Magdon-Ismail, co-founder of Venmo, and early Venmo investor Sam Lessin. "As a self diagnosed chaotic neutral whose hero is Jack Sparrow ... I highly approve of this insane crypto war playing out between degens, whales, and crypto trading platforms using JMJ even if I have nothing to do with it and only half understand it!" posted Lessin on X.
This was the second whale manipulation event on Hyperliquid in March. On March 12, a whale built a $306 million ether long position to profile $1.86 million after withdrawing 17 million USDC. Rumors at the time said the protocol was exploited, but Hyperliquid's team said its trading engine couldn't accommodate the position's size.
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