POPCAT fell 19% to $0.1262 as Hyperliquid faced renewed scrutiny over its leverage and risk management.
Decentralized perpetuals exchange Hyperliquid faced fresh turbulence on Wednesday after what appeared to be a deliberate attempt by a trader to manipulate the price of the POPCAT memecoin.
According to Arkham, an onchain analytics platform, a trader withdrew $3 million in USDC from OKX, splitting the funds across 19 different wallets. Each wallet opened large long positions on POPCAT using 5x leverage, collectively amassing an exposure of about $25-30 million.
The trader had put in approximately $20 million in buy orders at $0.21 per token, in an attempt to artificially pump the price of the memecoin.
However, when the trader later removed the large buy wall, POPCAT’s price collapsed almost instantly. Within minutes, all 19 wallets were liquidated, forcing Hyperliquid’s Hyperliquidity Provider (HLP) to inherit the losing positions. HLP is a community-owned vault that absorbs failed trades.
This resulted in a $4.9 million loss for the HLP, as data shown on Hyperliquid’s official website. On-chain researcher MLMabc, who first flagged the incident on X described the move as a “deliberate attempt to mess with” Hyperliquid.
The platform later confirmed that it had closed the positions manually to avoid the additional harm and stabilize the trading activity.
As the incident unfolded, Hyperliquid halted deposits and withdrawals through its Arbitrum bridge. Coinbase’s Director Conor Grogan noted that withdrawals were halted for more than 20 minutes before resuming.
An administrator on Hyperliquid’s Discord, going by the name ‘iliensinc,’ clarified that the Hyperliquid blockchain itself was not impacted. “The Arbitrum bridge’s automatic locking was triggered by a conservative set of conditions, and the bridge was unlocked after the situation was thoroughly investigated within ~25 minutes. Funds are safe,” he amplified.
The pause and subsequent fallout reignited community discussions about the risks on how manipulation in low-liquidity markets can cascade into systemic losses — even on decentralized platforms built to resist such attacks.
The POPCAT token, a Solana-based memecoin that surged in popularity earlier this year, dropped sharply after the liquidation event.
According to data from CoinMarketCap, POPCAT’s price fell around 19% in 24 hours to $0.1262, extending its yearly losses to more than 91%. The coin’s market capitalization now stands at roughly $123 million, reflecting shaken investor confidence after the trading chaos.
Despite the decline, on-chain activity remained elevated as traders speculated on short-term price volatility. POPCAT’s liquidity, however, thinned out further, amplifying fears of similar manipulation attempts in the future.
It is not the first occasion that Hyperliquid has encountered such a challenge. In March this year, the platform suffered a manipulation incident of the JELLYJELLY memecoin of Solana, as a trader shorted the token, compelling the HLP vault to take on about $12 million of unrealized losses.
The event triggered the demand of stricter risk management and Hyperliquid delisted JELLYJELLY, which was criticized to have its governance not as decentralized as it purports.
The Hyperliquid-POPCAT event underscores the delicate nature of the relationship between decentralization, leverage, and liquidity. Although the decentralized exchanges are transparent and have the benefit of the user control, they are prone to market manipulations and quick liquidations, particularly when traders take advantage of the thinly traded markets.
In the case of Hyperliquid, the episode can lead to reevaluation of its leverage model and risk management, especially in its community vault structure. To the wider DeFi community, it is an example of how harmful unregulated leverage in memecoin markets can be – where speculation can easily surpass the stability.
At this point, Hyperliquid has not given a clear schedule of when it will be able to restore deposits and withdrawals. To traders and investors, however, Wednesday was a bright reminder, in decentralized finance, manipulation and market shocks can still strike hard and fast.
