HyperLiquid has faced a major challenge due to price manipulation of the $JELLY token, leading to concerns about its security and risk management.
Market Manipulation Incident
According to Lookonchain, the incident was triggered by a sudden price surge of the $JELLY token, resulting in significant losses and exposing vulnerabilities in HyperLiquid’s system. The platform’s treasury was automatically set to a short position of $5 million in $JELLY. When the price unexpectedly surged by 230%, the Hyperliquidity Provider (HLP) faced about $12 million in unrealized losses. Arkham Intelligence exposed the manipulation scheme where a trader took advantage of system vulnerabilities to profit.
A Pattern of Problems for HyperLiquid
This incident isn't the first for HyperLiquid. In March, the platform lost $4 million due to an Ethereum liquidation event. The platform has since announced it will delist the $JELLY token to prevent further losses. HyperLiquid has reassured its users that their funds are secure and plans to compensate affected users.
The Centralization Debate
The $JELLY incident has sparked a broader debate about HyperLiquid’s decentralization. Arthur Hayes argued that the platform isn't truly decentralized. Gracy, CEO of Bitget, criticized HyperLiquid's handling of the incident. ZachXBT highlighted inconsistencies in the platform’s responses to different incidents, raising questions about its governance model and ability to protect users.
According to analysts, HyperLiquid needs to take additional measures to improve security and risk management to prevent similar incidents.
