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In a nutshell: Hyperliquid faces a problem due to a liquidation it failed to complete on time.
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The Hyperliquid token (HYPE) fell by 8.5 percent on Wednesday after a massive liquidation that left its HLP vault with a $4 million loss.
HYPE dropped from $14.04 to $12.84 before recovering some ground. HLP saw a user exploit its operation to withdraw profits while the system absorbed the loss. Lookonchain said a "whale" deposited 15.23 million USDC to open a long position on ether (160,234 ETH, approximately $306.85 million). It was liquidated but managed to withdraw 17.09 million USDC, pocketing 1.86 million in the process.
Hyperliquid clarified that it was not a hack but that its liquidation engine could not manage such a large position, which affected the HLP.
To prevent further scares, Hyperliquid will adjust the maximum leverage: 40x for BTC and 25x for ETH. Despite the recent loss, HLP still has an accumulated profit of $60 million. reminds users that it is not a risk-free strategy.