Bybit CEO Ben Zhou shared his thoughts on the recent massive ETH liquidation in Hyperliquid, highlighting the issues related to leverage on centralized (CEX) and decentralized (DEX) exchanges.
Ben Zhou's View on Hyperliquid Liquidation
Ben Zhou explained how a whale managed to execute a significant liquidation using a long position of 175,000 ETH, with 50x leverage, without causing a market crash. He mentioned that the whale made a 'quick and clean exit', leaving Hyperliquid with losses.
CEX vs DEX: Differences in Mechanisms
Zhou believes that both centralized and decentralized exchanges tend to allow their liquidation mechanisms to absorb long positions when whales are liquidated. In the case of the ETH whale, Hyperliquid's liquidation engine, the HLP Vault, took over the position at $1,915 per ETH and reduced the leverage by half.
What Happened to Hyperliquid’s Vault?
On March 12, a whale opened a long position on Hyperliquid with 50x leverage for 175,000 ETH worth $340 million. After the liquidation, the remaining position triggered a larger liquidation, and Hyperliquid lost more than $4 million. Hyperliquid stated that the loss was due to the user lowering their margin.
Considering the consequences of the liquidation, Hyperliquid decided to lower the maximum leverage for BTC and ETH to 40x and 25x respectively, to enhance maintenance margin requirements for larger positions.
