Hyperliquid Manipulation? The Controversy Around the ADL System Explained (October 2025)
- What Happened on October 10, 2025?
- @notnotstorm’s Defense: "ADL Saved Traders’ Profits"
- @seanlippel Fires Back: "ADL Is Flawed and Opaque"
- @fiddybps1’s Radical Take: "Ditch ADL for Socialized Loss"
- FAQs: Hyperliquid’s ADL Controversy
On October 10, 2025, Hyperliquid’s Auto-Deleveraging (ADL) mechanism triggered a firestorm in the crypto community after forcibly closing thousands of positions during a market crash. While some argue ADL protected traders, others call it outdated and unfair. This deep dive explores the debate, featuring insights from top analysts, data from CoinMarketCap, and a proposed alternative to ADL. Buckle up—this is crypto drama at its finest.
What Happened on October 10, 2025?
The crypto market was already on edge when a sudden liquidation cascade hit Hyperliquid, a major perpetual trading platform. Within minutes, 35,000 ADL events occurred, affecting 20,000 users and 161 tokens—primarily BTC, ETH, and SOL. The system automatically closed profitable shorts to offset losses from liquidated accounts, sparking outrage. Traders running delta-neutral strategies (e.g., long on Hyperliquid, short on BTCC) were left exposed when only one side of their hedge was axed. "It felt like robbery," one user tweeted. "My short was closed at the worst possible time—right before the market tanked further."
@notnotstorm’s Defense: "ADL Saved Traders’ Profits"
Pro-ADL analyst @notnotstorm crunched the numbers: 99% of ADLs happened during a 5-minute volatility spike (21:16 UTC). Prices later rebounded, meaning shorts would’ve lost gains if held. "ADL locked in optimal PnL for most," he argued, noting that without it, Hyperliquid might’ve faced insolvency—wiping all positions. TradingView charts show BTC’s 12% rebound post-ADL, supporting his claim. Still, critics called this a "big-cap bias."
@seanlippel Fires Back: "ADL Is Flawed and Opaque"
Professional trader @seanlippel countered that @notnotstorm ignored altcoins like ATOM and APT, where ADLs triggered earlier—before rebounds—erasing gains prematurely. He also slammed Hyperliquid’s lack of transparency: no ADL queue visibility, no flash-crash protection, and a thin insurance fund. "For institutional traders, this is systemic risk," he warned. CoinMarketCap data confirmed altcoins underperformed post-ADL, with FET dropping 23%.
@fiddybps1’s Radical Take: "Ditch ADL for Socialized Loss"
DeFi purist @fiddybps1 called ADL a "relic of centralized exchanges" ill-suited for cross-margin portfolios. He highlighted cases where neutral BTC/ETH traders got ADL’d due to isolated risk models. His fix? Socialized Loss (SL): spreading losses across all users if needed, with reversible adjustments. "SL is fairer, predictable, and blockchain-native," he said, citing its use in protocols like dYdX.
Why This Matters Beyond Hyperliquid
The incident exposed a crypto-wide dilemma: balancing protocol safety with trader fairness. As platforms like BTCC adopt hybrid models, the ADL debate could reshape risk engineering. One thing’s clear—2025’s crash proved even pros can’t outmaneuver systemic quirks.
FAQs: Hyperliquid’s ADL Controversy
What is Auto-Deleveraging (ADL)?
ADL is a mechanism that forcibly closes profitable positions to cover losses from liquidated accounts, preventing exchange insolvency.
Did ADL help or hurt traders in October 2025?
It’s divisive. Data shows ADL protected BTC/ETH shorts but harmed altcoin traders. Context matters—see CoinMarketCap for token-specific performance.
Are there alternatives to ADL?
Yes, like Socialized Loss (SL), which distributes losses across all users proportionally instead of targeting individual positions.
