Liquidation mechanism attacked again, is HyperLiquid's reputation as "Binance on the chain" going to be ruined?

After being attacked by 50x leverage whales using mechanism loopholes last time, HyperLiquid is in trouble again.

The method is exactly the same, and the operation is open and transparent, but this time the target is changed to $JELLYJELLY, a meme coin with far less liquidity than ETH.

Although the platform adjusted the mechanism after the last incident, judging from the results this time, the protection is still weak, and HyperLiquid has finally paid for its negligence and arrogance.

Event summary

Last night, the decentralized contract platform HyperLiquid encountered a carefully planned on-chain hunting. Around the $JELLYJELLY token, some people used short orders, manipulated the currency price, induced system liquidation and other methods to jointly hedge the platform treasury, which attracted widespread attention.

The incident was triggered by a huge short order: the address 0xde9...f5c91 opened a $JELLYJELLY short order worth $4.08 million at a price of $0.0095, and invested 3.5 million USDC as a margin, which was actually a "bait" to induce the system to take over.

Subsequently, another address Hc8gN...WRcwq dumped the spot market to create short floating profits. Short position holders took the opportunity to withdraw most of the margin, causing the platform to automatically take over the position and transfer the risk to the vault.

The trader then reversed the order and bought a large amount of $JELLYJELLY to push up the price of the currency, causing the short orders held by the system to suffer huge losses. At this time, retail investors began to withdraw funds, the pressure on the vault doubled, and the liquidation price continued to move down. By the peak, the floating loss of the vault had exceeded 10 million US dollars, and the TVL decreased by about 20 million US dollars. At the same time, according to the analysis of crypto KOL @ai_9684xtpa, if the price of the coin rises to $0.17, the treasury may be forced to close, facing a loss of up to $240 million.

According to monitoring, the pumping address once held 120 million $JELLYJELLY (about $5 million), which is the largest holder on the chain. The funds of this address are suspected to be exhausted, and the price of the coin began to fluctuate violently.

Community reaction

Such a thrilling event quickly triggered widespread discussion on Twitter.

Crypto KOL @thecryptoskanda was the first to speak out, calling for "Binance to list $JELLYJELLY". Soon after, Binance co-founder He Yi retweeted the response and expressed his approval. A few minutes later, Binance officially announced that it would launch the $JELLYJELLY perpetual contract tomorrow.

At the same time, HyperLiquid officially chose to "unplug the network cable" and directly delisted $JELLYJELLY, but made a profit of $703,000 by clearing short orders before delisting. Although they said it was a committee vote, the move also caused more controversy.

Arthur Hayes, founder of BitMEX, immediately said: "HyperLiquid is no longer decentralized," and predicted that HYPE will continue to weaken and eventually return to the starting point.

Andre Cronje, co-founder of Sonic Labs, also published an article on the X platform criticizing HyperLiquid's leverage mechanism. He believes that the leverage multiple should not be a fixed function, but should be adjusted dynamically according to available liquidity and actual volatility. For example: small positions can be given 1000 times leverage, and large positions should be limited to 1.2 times. In DeFi, fixed leverage is an extremely dangerous design.

On-chain detective ZachXBT was even more angry, criticizing HyperLiquid officials for manipulating prices, and turning a blind eye to hackers opening positions on the platform to launder money.

After the incident, according to the official website of HyperLiquid, its HLP TVL dropped sharply to US$197 million in a short period of time. It is reported that HLP TVL was as high as 240 million US dollars before.

For a time, the public opinion was completely reversed. Hyperliquid, which was once praised by believers as "Binance on the chain", is rapidly losing market trust.

CEX in the skin of DEX?

Although the hunting incident ended with HyperLiquid pulling out $JELLYJELLY and the platform temporarily stopped bleeding, the community also realized the "actual combat test" of the mechanism loopholes in the short term, but the problems behind it are far from being answered.

For example, after the first mechanism was attacked, did the platform really evaluate the imbalance risk between leverage and liquidity? This time, facing the liquidation crisis, why did it choose to stop losses in a nearly centralized way by delisting trading pairs instead of relying on the preset risk control mechanism?

From another perspective, if the platform claims to insist on decentralization, why can it "shut down the network" with one click at a critical moment? If "survival first" is chosen, how much of the essential difference between HyperLiquid and CEX is left?

These unanswered questions point to a deeper dilemma: when decentralized platforms face extreme market shocks, should they let the code speak or should the backend team make the final decision?

As a user, I believe that on-chain transactions will eventually be the future, but whether HyperLiquid can reach that step is far from an answer. Maybe it is a test product, maybe it will survive and become a new standard. But today, its decentralized narrative is already on the edge of a cliff.