After being hunted by whales and CEX, Hyperliquid "pulls the plug" to save $200 million
Tonight, a liquidity crisis sparked by the JellyJelly-associated Memecoin $JELLY, created by former Facebook Vice President of Product lessin, has thrust derivative DEX Hyperliquid into the eye of the storm. From whale price manipulation, CEX sniper attacks, to protocol emergency "pulling the plug" self-rescue, this crisis has not only exposed the governance weakness of decentralized protocols but has also evolved into a face-off between CEX and Perp DEX.
Hyperliquidity Pulling the Plug

Tonight, another exciting whale battle unfolded on-chain, with address "0x20e8" opening a 2.5 billion $JELLY long position in the 0.0095 price range at 8:53 on the 26th, amounting to approximately $2.1 million at the time (link).

Then, 10 minutes later, around 9:00 on the 26th, address "0xde95" first opened a 3.98 billion $JELLY short position on Hyperliquid perpetual futures, amounting to approximately $4.5 million at the time (link), while also buying $JELLY spot on-chain to artificially raise the spot price and subsequently removing collateral from the short position.

This triggered the mechanism of HLP, as HLP's market-making strategy calculates a fair price by integrating tick data from Hyperliquid and mainstream CEX, and executes strategies to continuously provide 24/7 liquidity. Therefore, when the $JELLY price drops, HLP acts as a counterparty during the liquidation period, inheriting the short positions amounting to approximately $5 million.
Subsequently, the address continued to buy back $JELLY, causing a significant price surge due to low liquidity. At this point, HLP held a passive short position of 3.98 billion $JELLY (valued at approximately $15.3 million at the time) due to the token price rise, resulting in nearly a $12 million loss for HLP. According to on-chain data analyst @ai_9684xtpa, if the counterpart raises the coin price to around $0.17, the Hyperliquid Vault will face liquidation and lose the $240 million it currently holds. At this time, the price fluctuates between $0.035-$0.045, only requiring roughly a threefold increase for one of Hyperliquid's treasuries holding $240 million to vanish into thin air.
Renowned crypto influencer CryptoSkanda "@thecryptoskanda" ignited a spark on Twitter, suggesting that Binance should list JELLY for spot trading or merely hinting at considering JELLY listing. Through his own influence, he further boosted the JELLY price to outcompete Hyperliquid. In response, Binance's co-founder He Yi replied, "Noted."
Around 11 PM on the 26th, several community members noticed that the $JELLY token's K-line on HyperLiquid had stopped updating, indicating a potential delisting of $JELLY. As retail and large-scale holders collectively "attacked" HyperLiquid, the project's treasury funds were reduced to $50 million to minimize risks, and the liquidation price dropped to $0.14.
10 minutes later, both OKX and Binance announced the listing of JELLY perpetual contracts. Subsequently, Hyperliquid responded on Discord, stating that upon detecting suspicious market activity, the Validator Council voted to delist the JELLY perpetual contract. Except for tagged addresses, all user losses will be fully compensated by the Hyper Foundation. This meant that after the so-called "vote," they directly settled on-chain activities at a price of $0.0095, enraging community members. "DEX" turned into "CEX" overnight, and Hyperliquid even profited $700,000 from this liquidation.
CZ referenced a previous tweet about "DEX vs. CEX" on social media and wrote, "I know I'm not that smart. I admit when I don’t know. I often feel those smart people must have a trick I don't, to do things that I can't. But occasionally, I find: the most fundamental rules still apply."
Arthur Hayes even claimed that Hyperliquid mishandled the JELLY incident, indicating that it is not truly decentralized. He expressed that traders do not care about decentralization and believed that the HYPE would quickly plummet back to zero.
The impact of this event is still unfolding, whether it be the previous DEX insider trading or the recent large holders on PolyMarket coercing a "prediction outcome." CEX customer data breaches or market maker manipulation of CEX prices events, nearly every day reminds cryptocurrency practitioners of the many issues they still need to address. BlockBeats will continue to monitor the event's developments.
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