Hyperliquid faces criticism after a whale trader inflated the value of futures contracts for the XPL token by 200%, netting $15 million and inflicting millions of dollars in losses for other traders on Wednesday.
Those traders now demand answers on why Hyperliquid didn’t do more to protect them from the large trader who managed to distort the price.
“This was not simply about a whale’s action, but about the mechanics of how it was possible to force the price up on Hyperliquid while other exchanges remained stable,” Monolith, a crypto hedge fund, said in an X post.
Monolith, as well as several other traders who lost money during the incident, argue that Hyperliquid provided no protections to prevent rich users from “manipulating” the market.
The large trader deliberately chose Hyperliquid to execute the trade instead of Binance, Bybit or any other perpetual futures exchange because of a lack of safeguards, Monolith argued.
‘It was only a matter of time before there was a pre-market perp price manipulation.’
Hyperliquid did not immediately respond to a request for comment.
The protocol has responded to the August 27 incident, telling users that the platform worked as intended and that such pre-launch markets are inherently unpredictable.
The incident marks a setback for one of DeFi’s standout success stories in recent years.
Since its 2023 launch, Hyperliquid has eclipsed all other onchain perpetual futures platforms. It’s a hit with traders because it marries the speed and usability of centralised exchanges like Binance with the transparency and self-custody of DeFi.
Over the past month, it handled more than $390 billion in trading volume, 851% more than the next biggest protocol, per DefiLlama data.
Yet Hyperliquid has added new futures markets that put traders at risk in its eagerness to grow the platform’s user base, critics say.
“Pre-market perps are extraordinarily high risk,” Ryan Galvankar, founder of Opt.fun, an options trading protocol on the Hyperliquid blockchain, told DL News.
“It was only a matter of time before there was a pre-market perp price manipulation.”
The whale’s trade focused on the newly launched perpetual futures market for XPL, the native token of Plasma, a soon-to-be-launched blockchain backed by Tether’s sister company, Bitfinex.
They used a large amount of funds to buy up all available futures contracts, pushing up the price from around $0.60 to $1.80 in minutes.
Many traders who bought XPL during its initial coin offering in July had entered into short positions on Hyperliquid’s XPL market to hedge their tokens.
