A high-stakes Ethereum (ETH) trade on Hyperliquid resulted in a significant $4 million loss for the platform’s liquidity vault, marking its largest one-day setback since its inception in May 2023.
The incident involved a trader using the wallet address ‘0xf3f4,’ who executed a highly leveraged 50x long ETH position.
Initially, the trader deposited 4.3 million USDC as margin to support a position of 113,000 ETH. However, a series of withdrawals reduced the margin below maintenance requirements, triggering large-scale liquidations.
Despite the turbulence, the trader secured a profit of $1.8 million, while Hyperliquid Provider (HLP) vault absorbed the $4 million loss.
Hyperliquid is a decentralized trading platform specializing in perpetual futures, handling over $8.2 billion in daily trading volume. The HLP vault operates as a community-driven liquidity pool where users can stake USDC to participate in market-making and liquidation strategies.
Hyperliquid Denies Exploit, Clarifies Risks
Following the liquidation event, speculation emerged among users about a possible exploit. Hyperliquid addressed the concerns through an X post, clarifying that no security breach or protocol exploit occurred.
Further analysis by on-chain investigator EmberCN revealed that the trader initially held a long position of 175,000 ETH, valued at around $340 million.
The trader later adjusted the position by withdrawing $17.09 million USDC, reducing the margin for the remaining 160,000 ETH. This move contributed to the cascading liquidations that impacted the HLP vault.
In response, Hyperliquid announced adjustments to its risk management measures. The platform plans to lower the maximum leverage for Bitcoin (BTC) and Ethereum (ETH) trades to 40x and 25x.
Despite the setback, Hyperliquid reassured users that the HLP vault maintains a historical net profit of approximately $60 million, underscoring its resilience in the volatile crypto trading landscape.
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