XPL Flash Crash Investigation: 16 Linked Wallets Withdrew Margin in Advance, Causing Hyperliquid HLP to Take Over XPL Long Positions and Lose $556,000

Odaily: filo, a member of the liquidity service provider Quote Markets team, published a retrospective on the XPL flash crash on Hyperliquid on November 1. During the XPL flash crash on Hyperliquid on November 1, 16 wallets with linked funding and trading behavior collectively withdrew approximately $2.0386 million in margin before the price plunge, causing the HLP liquidation vault to take over a large number of XPL long positions. HLP ultimately took over approximately 160 million XPL tokens and completed the sale within about 75 minutes, incurring a loss of approximately $555,787, equivalent to 55.6% of the liquidation vault's own capital.

The investigation showed that 14 of the 16 wallets had linkages in funding sources or trading behavior, and 12 of them withdrew funds in advance, accounting for 90.7% of the positions taken over by HLP. However, the investigation did not find direct evidence that these wallets caused the XPL crash, nor could it confirm whether they hedged on other trading platforms.

It is worth noting that these 16 wallets did not profit from the incident on Hyperliquid, with combined losses of approximately $711,000. In addition, XPL had already fallen about 6% before the first liquidation occurred on Hyperliquid, so the liquidation was not the starting point of the crash, and Binance's perpetual futures also showed significantly larger aggressive selling volume in the initial phase.