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Cryptocurrency News Articles
Hyperliquid Market Manipulation Attempt Could Cost a Trader Nearly $1 Million
Mar 27, 2025 at 11:40 pm
The trader attempted to exploit price movements of the JELLY memecoin through a series of calculated trades.
A trader accused of market manipulation on crypto trading platform Hyperliquid could lose nearly $1 million, according to blockchain analytics firm Arkham Intelligence.
The trader attempted to exploit price movements of the JELLY memecoin through a series of calculated trades. However, Hyperliquid responded by freezing accounts, limiting actions, and shutting down the JELLY token market.
According to Arkham, the trader created three different accounts within minutes. Two of those accounts placed large bets that the price of JELLY would go up, known as long positions. These positions were valued at $2.15 million and $1.9 million. The third account opened a short position worth $4.1 million, which was a bet that the price would go down.
This setup allowed the trader to increase leverage—essentially borrowing more funds based on collateral—to gain more exposure to potential price movements. This move was likely intended to threaten the platform’s liquidation system and withdraw profits before it could react, explained Arkham.
JELLY Price Spike Triggered Liquidation of the Short Position
The scheme began to unravel when the price of JELLY rose over 400%. The large short position then became vulnerable to liquidation. On trading platforms, when a position becomes too risky, it is automatically sold to prevent further losses. In this case, the short position was too large to be handled instantly and was passed to Hyperliquid’s liquidity protection system, known as the Hyperliquidity Provider Vault (HLP).
At the same time, the trader withdrew collateral from the two accounts that showed large paper profits. At that point, the trader had a seven-figure unrealized profit, said Arkham.
Hyperliquid quickly responded by placing restrictions on the trader’s accounts. The accounts were limited to “reduce-only” orders, meaning they could only sell existing positions and not open new ones. This move was meant to prevent the trader from exploiting the situation any further.
The trader then attempted to recover funds by selling tokens from one of the accounts. However, Hyperliquid soon closed the JELLY market and set the final price at $0.0095—the same as the short position price. This erased all floating profit and loss from the two accounts, effectively canceling out the gains the trader had tried to extract.
$1 Million Still Stuck in the Hyperliquid System
The trader managed to withdraw $6.26 million from the platform before restrictions were applied, explained Arkham. However, around $1 million remains frozen in the affected accounts.
“If he can withdraw this in the future, the total loss would be around $4,000. But if not, the trader could be facing a loss close to $1 million,” explained the blockchain analytics firm.
This isn’t the first time Hyperliquid has dealt with aggressive trading tactics. Earlier in March, the platform increased margin requirements after a large Ether (ETH) liquidation caused serious losses.
On March 12, a whale trader deliberately liquidated a $200 million long position in ETH, leading to a $4 million loss for the platform’s liquidity pool. In response, Hyperliquid decided to make trading conditions stricter to reduce future risks.
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
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