Hyperliquid Trader Offloads $4M Loss onto HLP Vault, Igniting Discussions on Systemic Risk
- Hyperliquid trader "0xf3f4" triggered a $4M HLP Vault loss via ETH liquidation, exploiting margin withdrawals to shift risks to the platform's liquidity buffer. - The incident exposed systemic risks in DeFi leverage trading, prompting Hyperliquid to reduce BTC/ETH max leverage to 40x/25x to prevent cascading losses. - High-profile traders like "0xa523" (40x leveraged $40M loss) and James Wynn (recurring high-risk bets) highlight vulnerabilities in leveraged strategies and platform safeguards. - Critics a
A prominent trader known as "0xa523" has left Hyperliquid after suffering a staggering $40 million loss, overtaking the previous record set by James Wynn, who lost $23.6 million. The majority of these losses resulted from aggressive leveraged trades, most notably a $39.66 million setback on Hyperliquid’s HYPE token, where 886,287 tokens were sold just before the price recovered. Additional losses were recorded on Ether (ETH) and
Another major event involved the forced closure of a $306.85 million
James Wynn, who previously held the record for the largest loss on the platform, has also come under scrutiny. After a $100 million BTC position was liquidated in July, Wynn returned with more high-risk trades, including a 40x leveraged long on BTC and a 10x long on
The forced liquidation of the 0xf3f4 ETH position has fueled discussions about possible market manipulation. Observers noted that the trader’s tactic of withdrawing margin to prompt liquidation at higher prices shifted losses onto the HLP Vault. This approach, known as liquidation arbitrage, has been seen in previous DeFi incidents. Market depth analysis by EmberCN indicated that Hyperliquid’s liquidation mechanism struggled to close the position without worsening the price drop Hyperliquid’s $4M Liquidation Loss Raises Manipulation Fears [ 2 ].
Following the event, Hyperliquid’s HYPE token initially fell by 11% but later recovered to $13.02. The HLP Vault still holds a net profit of $60 million, though the recent $4 million loss accounts for 6.6% of its total historical gains. Some critics argue that simply lowering leverage and adjusting margin requirements may not be enough to eliminate systemic risk, especially since high-leverage trading continues to attract illicit activity. Blockchain analysts have traced certain Hyperliquid trades to phishing operations and North Korean hackers, raising alarms about potential money laundering Hyperliquid’s $4M Liquidation Loss Raises Manipulation Fears [ 2 ].
This episode highlights the dangers present in decentralized exchanges (DEXs), where high-leverage trades and automated liquidations can magnify losses for both individual traders and liquidity providers. As Hyperliquid works to address these issues, the wider crypto community remains vigilant, particularly as Ethereum’s price movement and ETH’s surge above $2,000 come under increased observation Hyperliquid’s $4M Liquidation Loss Raises Manipulation Fears [ 2 ].
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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