The cryptocurrency exchange Hyperliquid suffered significant losses due to a high-leverage trade. The incident prompted changes in trading conditions on the platform.
Incident at Hyperliquid Exchange
On March 12, an investor on Hyperliquid used a 50x leverage to open a $270 million Ether long position. This trade led to a $4 million loss for Hyperliquid, as the investor withdrew assets without causing a price drop. Smart contract auditor Three Sigma stated this was a liquidity mechanics issue, not a bug or exploit.
Changes in Trading Conditions
In response, Hyperliquid lowered the leverage for Bitcoin to 40x and for Ether to 25x. This is intended to provide a better buffer for larger position liquidations. Bybit CEO Ben Zhou noted that centralized exchanges face similar issues and reducing leverage may negatively impact business.
Consequences and Reactions
Following the liquidation event involving a large investor and the associated losses, the Hyperliquid protocol experienced an asset outflow of $166 million. According to Dune Analytics data, this occurred on the same day as the trade.
The incident with the large trade on Hyperliquid highlights the risks of high-leverage trading on decentralized platforms. Measures taken in response aim to mitigate risks, though questions about long-term sustainability remain.
