Hyperliquid (HYPE) Slumps Due To A $6M JELLY Short: : Is Hyperliquid Safe for Users?
Hyperliquid’s native token, HYPE, has seen a sharp decline, falling below $15 with a nearly 10% drop in the past 24 hours. This downturn comes as the decentralized exchange faces intense scrutiny following its controversial delisting of the JELLY token over alleged market manipulation.
The incident has ignited widespread criticism of Hyperliquid’s governance model, raising doubts about its claims of decentralization. As a result, trust in the platform has eroded among some traders, further fueling concerns about its long-term credibility.
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JELLY Short Accident: Everything You Need To Know
On March 26, a trader opened a $6 million short position on JellyJelly (JELLY), a low-cap token with a market valuation of only $10 million at the time.
Soon after, the trader removed the margin, forcing Hyperliquid’s HLP vault, which absorbs liquidated positions, to take on the short position and assume the associated risk. What followed was financial turmoil.
With the position now under HLP’s control, the market reacted dramatically. A short squeeze occurred, propelling JELLY’s market cap from $10 million to over $50 million in less than an hour.
As Hyperliquid struggled to manage the situation, a new wallet (0x20e8) opened a large long position, generating $8.2 million in profits.
The timing of this trade was impeccable. Shortly after, Binance and OKX listed JELLY perpetual futures, adding fuel to the already volatile market.
The trader behind the scheme moved $7.17 million across three Hyperliquid accounts, withdrawing $6.26 million and leaving behind an inaccessible balance of $900,000.
Faced with mounting losses, Hyperliquid made a critical decision. In response, the platform delisted JELLY and closed the short position, preventing catastrophic losses. The token was force-delisted at $0.0095 per token. The exchange then liquidated 392 million JELLY tokens worth $3.72 million, making a profit of $703,000 in the process.
The incident has sparked significant criticism of Hyperliquid’s governance model, raising concerns about its claims of decentralization. As a result, trust among some traders has diminished, further fueling skepticism about the platform’s long-term viability.
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What’s the Next for Hyperliquid?
The fallout from the JELLY delisting has directly impacted the price of Hyperliquid’s native token, HYPE. The token saw a 16% drop within hours of the incident and the ensuing criticism, and it has continued to decline by nearly 10% over the past 24 hours, now hovering around $14. With some traders apparently withdrawing assets and exploring alternative decentralized exchanges, this sharp drop in value signals a potential erosion of confidence in the platform.
The sudden delisting of JELLY and the subsequent price drop of HYPE have severely impacted Hyperliquid’s reputation, raising serious doubts about its decentralized nature. While the platform’s swift response likely prevented a more significant financial disaster, the scandal has undeniably damaged user trust and sparked critical conversations about the governance model of decentralized finance (DeFi) platforms.
Now, Hyperliquid faces an uphill battle to regain traders’ confidence and prove its commitment to the core principles of decentralization.
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