Source: Cointelegraph Original: "{title}"

Bybit CEO Ben Zhou commented on the $4 million loss suffered by the decentralized exchange (DEX) Hyperliquid due to high-leverage trading by an Ethereum (ETH) whale, pointing out that centralized exchanges (CEX) face similar challenges.

On March 12, a crypto investor made $1.8 million through leveraged trading on the Hyperliquid decentralized exchange (DEX), forcing the Hyperliquidity Pool (HLP) to bear a $4 million loss.

The trader used approximately 50x leverage to turn $10 million into a $270 million long position in ETH. However, the trader was unable to exit without affecting their position. Instead, they withdrew collateral, offloaded assets without triggering a self-inflicted price drop, ultimately leaving Hyperliquid to absorb the loss.

Smart contract auditing firm Three Sigma stated that this trade was a "brutal liquidity mechanism game," rather than a flaw or exploit. Hyperliquid also clarified that this was not a protocol vulnerability or a hacking incident.

Source: Hyperliquid

Hyperliquid Lowers Leverage Trading Limits for BTC and ETH

In response, Hyperliquid reduced its Bitcoin (BTC) leverage to 40x and lowered the ETH leverage limit to 25x. This increased the maintenance margin requirements for large positions on the decentralized exchange (DEX). Hyperliquid stated, "This will provide better cushioning for the liquidation of large positions."

In a post on X, Bybit CEO commented on the trade, stating that centralized exchanges (CEX) face the same situation. Zhou mentioned that when whale positions are liquidated, their liquidation engine takes over those positions. While reducing leverage may be an effective solution, Zhou noted that it could negatively impact the business: "I see HP (Hyperliquid) has reduced overall leverage; this is one method, possibly the most effective, but it hurts the business because users want higher leverage."

Zhou suggested adopting a more dynamic risk limit mechanism that reduces overall leverage as positions increase. The executive stated that on centralized platforms, if whale positions become too large, they are reduced to 1.5x leverage. Nevertheless, the executive also acknowledged that users can still use multiple accounts to achieve the same result.

Bybit CEO also added that even the ability to reduce leverage could be "abused" if the DEX does not implement risk management measures, such as monitoring and oversight, to identify "market manipulators," similar to the regulatory level of CEX.

Hyperliquid Experiences $166 Million Net Outflow

Following the ETH whale liquidation event and the losses suffered by the HLP Vault, the protocol experienced a massive outflow of assets. Data from Dune Analytics indicated that Hyperliquid faced a net outflow of $166 million on March 12—the same day the trade occurred.

Related: Crypto detective ZachXBT reported that he discovered a 50x Hyperliquid whale.

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