On March 12, 2025, Hyperliquid faced a $4 million loss due to a $200 million position liquidation on its decentralized exchange platform.
Events Leading to Liquidation
A trader identified by wallet address ‘0xf3f4’ opened a 50x leveraged long position, depositing $4.3 million in USDC to control 113,000 ETH. As Ethereum's price fluctuated, the trader began withdrawing funds, leading to an automatic liquidation. Despite the liquidation, the trader secured a $1.8 million profit, while Hyperliquid’s vault bore a $4 million loss.
Impact on the HLP Vault and Platform Response
The $4 million loss represented about 1% of the vault’s total value locked (TVL) and 6.6% of its historical profits of $60 million. In response, Hyperliquid lowered maximum leverage limits: for Bitcoin to 40x, and for Ethereum to 25x to enhance risk management.
Market Reaction and Future Outlook
Following the liquidation, Hyperliquid's native token, HYPE, fell by 8.5%. This incident triggered discussions on the platform’s risk management shortcomings. However, Hyperliquid maintains that no exploitation occurred. The event highlights the risks of high-leverage trading.
Hyperliquid aims to restore trust by improving its risk management systems. The incident underscores the importance of robust practices in DeFi.
