After being hunted by whales and CEX, Hyperliquid "pulled the plug" to save 200 million USD

Tonight, a liquidity crisis triggered by the Memecoin $JELLY affiliated with the video social app JellyJelly, created by former Venmo co-founder Iqram and early Facebook product VP investor Sam Lessin, has thrust the head derivative DEX Hyperliquid into the eye of the storm. From whale price manipulation, CEX sniper attacks, to protocol emergency "rug pulls" for self-rescue, this crisis has not only exposed the governance Achilles' heel of decentralized protocols but has also evolved into a direct confrontation between CEX and Perp DEX.

Tonight, on-chain once again witnessed a spectacular battle between whales. The address "0x20e8" opened a long position of 250 million $JELLY tokens at a price range of 0.0095 at 8:53 on the 26th, equivalent to about $2.1 million USD at the time.

Then, 10 minutes later, around 9 pm on the 26th, address "0xde95" first opened a short position of 398 million $JELLY tokens on Hyperliquid perpetual futures, equivalent to about $4.5 million USD, while also buying $JELLY spot on-chain to artificially drive up the spot price, after which the address removed the margin from the short position.

This action triggered HLP's mechanism. Due to HLP's market-making strategy, which calculates a fair price by integrating Tick data from Hyperliquid and major CEXs and executes strategies to offer 24/7 liquidity, when the $JELLY price decreases, HLP acts as a counterparty during liquidation, inheriting the short position valued at about $5 million.

Subsequently, the address continued to buy back $JELLY, causing a price surge due to low liquidity. At this point, HLP held a passive short position of 398 million $JELLY tokens, valued at about $15.3 million due to the token price increase, resulting in nearly a $12 million loss for HLP. According to on-chain data analyst @ai_9684xtpa, if the counterparty pushes the price to around $0.17, the Hyperliquid Vault will face liquidation and lose the current $240 million held. The price is currently fluctuating between $0.035 and $0.045, requiring only about a threefold increase for one of Hyperliquid's treasuries holding $240 million to vanish into thin air.

Renowned crypto Key Opinion Leader CryptoSkanda "@thecryptoskanda" has also stirred up a storm on Twitter, suggesting that Binance should list JELLY spot trading, or merely claiming to consider listing JELLY trading, to further boost the JELLY coin price through his own influence and to eliminate Hyperliquid as a competitor. In response, Binance Co-Founder He Yi stated, "Okay, noted."

Around 11 PM on the 26th, community members began to notice that the $JELLY token's trading chart on HyperLiquid had stopped updating, indicating that $JELLY had possibly been delisted. As retail and large-scale holders collectively "attacked" the HyperLiquid team, the treasury funds had been reduced to $50 million to minimize risk, and the liquidation price had dropped to $0.14.

10 minutes later, both OKX and Binance successively announced the listing of JELLY perpetual contracts. Subsequently, Hyperliquid responded on Discord, stating that after detecting suspicious market activity, the Validator Committee voted to delist the JELLY perpetual contract. Except for tagged addresses, all user losses will be fully compensated by the Hyper Foundation. This means that after the so-called "vote," they directly liquidated on-chain activity at a price of $0.0095, which thoroughly angered community members. "DEX" overnight turned into "CEX," and Hyperliquid even profited $700,000 in this liquidation.

CZ quoted a previous tweet about "DEX is not as good as CEX" on social media and captioned it with "I know I'm not that smart. When I don't understand, I admit it. I often think that those talented people must have mastered some tricks that I don't know in order to do what I can't. But occasionally, I find out: the most basic rules still apply."

Arthur Hayes further believes that Hyperliquid failed to handle the JELLY incident, indicating that it is not truly decentralized, and traders do not care about decentralization. He also believes that the HYPE will soon return to its original state.

The impact of this incident is still unfolding, whether it be insider trading in DEX previously or recent events such as large holders on PolyMarket forcibly deciding the "prediction outcome," CEX customer data breaches, or market maker manipulation of CEX prices. It almost reminds cryptocurrency practitioners every day of the many issues that need to be addressed. BlockBeats will continue to follow the development of the event.

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