Original author: Bright, Foresight News
Hyperliquid, which was once questioned and FUDed in the first half of the year, has stood up again.
On May 22, as BTC broke through the $110,000 mark, HYPE broke through 30 USDT, with a 24-hour increase of 14.79%, and the total FDV stood at $29 billion, jumping to the 14th place in the cryptocurrency market value. On the contrary, a whale has been shorting HYPE worth $57.14 million with 5x leverage since May 8 at around $20.4, and the current floating loss of the position is $18.8 million. To prevent liquidation, the address has added margin three times, the latest time was embarrassed to add $2.04 million USDC two hours ago to avoid forced liquidation of the position.
At the same time, Hyperliquid officially announced that its platform data set several historical highs today, including the total open interest (OI) reaching US$8.9 billion, 24-hour transaction fees reaching US$5.4 million, and the total USDC locked volume reaching US$3.2 billion.
You should know that two months ago, Hyperliquid was in the midst of a treasury explosion and a “decentralized” FUD crisis. Bitmart founder Arthur Hayes directly criticized Hyperliquid on X, saying that “HYPE will return to the starting point” and asked everyone to “stop pretending that Hyperliquid is decentralized.”
On-chain Perp demand remains high
After the JELLY short squeeze event subsided, more and more whales began to choose Hyperliquid. According to data from The Block, Hyperliquid had accounted for about 9% of Binance’s contract trading volume for two consecutive months before the short squeeze event.
According to Dune data, Hyperliquid is growing rapidly in both trading volume and user numbers. What? Have the whales forgotten about the short squeeze?
Hyperliquid chose not the absolute concept of decentralization, but capital efficiency and protocol security first. As Zuo Ye wrote in the article Hyperliquid: 9% of Binance, 78% of Centralization - in the Perp DEX sequence, Hyperliquids innovation is not in the innovation of the architecture, but in the slightly centralized way, learning the LP tokenization of GMX, and cooperating with the listing and airdrop strategies, continuously stimulating market competition, and successfully seizing the derivatives market firmly occupied by CEX. This is not to defend hyperliquid, but the background of Perp DEX. If you want absolute decentralized governance, you will not be able to deal with black swan events, and you will not have time to respond quickly. To respond efficiently, you must need a sword holder.
Therefore, the whales chose to trust Hyperliquid, the sword bearer that mainly relies on smart contracts and supplemented by staking node voting, rather than mature CEX. The following three factors are the key to Hyperliquids escape from the haze.
1. Anonymity needs. Many whales and large investors attach great importance to personal privacy protection, and at the same time do not want to be subject to the restrictions on withdrawals and transfers that may exist in centralized exchanges.
Second, good liquidity. A large pool can accommodate big whales. In fact, only a few leading centralized exchanges can match the liquidity of Hypeliquid.
3. Public holdings. KOLs such as James can form such a money and influence cycle - using Hypeliquids on-chain public large positions and profits to enhance their own influence, and then further encourage retail investors to follow orders through influence, thereby achieving the purpose of influencing market trends. In traditional CEX, KOLs also need to connect to the exchange API to display their holdings.
In this round of rise, the whales in Hyperliquid were very active. First, there was the 50x Insider (before HYPE modified the leverage) extreme operation, and then there was the Meme legend James Wynn who opened a large number of long positions. Especially the latter, he made a profit of more than 40 million US dollars through a long position of nearly 1 billion during the rally of BTC breaking the historical high.
At the same time, in order to solve the problems of stablecoin interest and outflow, Hyperliquid launched the native stablecoin HUSD, which combines two core insights: integrating the pricing assets (stablecoins) used in transactions and the cash flow generated by them into the trading platform system. The final result is a stablecoin of public product nature, which converts the originally static reserve interest into active, compound growth of the Hyperliquid ecosystem.
Review: JELLY Short Squeeze Haze
Lets go back to the evening of March 26, when the Meme coin JELLYJELLY was squeezed by short sellers and rose 429% in one hour. Hyperliquid Valut took over the JELLYJELLY short position after an address liquidated itself, and once suffered a floating loss of more than $10.5 million. At that time, if JELLYJELLY reached $0.15374, Hyperliquid Vault would lose all of its $230 million in funds; and as funds from Hyperliquid Vault flowed out, the liquidation price of JELLYJELLY would be further reduced.
After the incident, OKX and Binance announced the launch of JELLYJELLY perpetual contracts that evening. Hyperliquid quickly delisted JELLYJELLY after Binance and OKX launched futures contracts, and the huge loss-making short positions of JELLYJELLY in the Hyperliquid Vault have also been settled.
Just when the crowd thought that Hyperliquid was admitting defeat, the situation ushered in an unexpected but reasonable reversal. According to historical data on Hyperliquids official website, the JELLYJELLY short position taken over by Hyperliquid Vault was closed at $0.0095 at 23:15. The expected loss of more than 10 million US dollars did not occur, and HLP Vault even made a profit of $703,000 on the position. Subsequently, Hyperliquid issued a statement saying that after discovering evidence of suspicious market activities, the validators gathered to hold a meeting and voted to remove the JELLY perpetual contract. Except for the marked addresses, all users will receive full compensation from the Hyper Foundation.
According to Parsec dashboard data, within a few hours of the Jelly liquidation incident, the net outflow of USDC on the Hyperliquid platform reached $140 million. In the four days before and after the ETH whale long liquidation on March 12, the total net outflow of USDC on Hyperliquid was close to $300 million. From February 26 to March 26, the USDC balance of Hyperliquid also dropped from about $2.5 billion to $2.07 billion.
In response to this incident, people led by many CEX CEOs questioned Hyperliquid. They all agreed that Hyperliquid, which claims to be a decentralized exchange, operates more like an offshore CEX without KYC/AML, and immature operations may also become FTX 2.0. However, some people pointed out that the head exchange is the most suspicious initiator behind the pursuit of Hyperliquid. User off_thetarget even broke the news on X that as early as March 24, someone contacted him to help promote JELLYJELLY on Binance. After the blogger assisted him in contacting the currency group, the feedback was that it was unlikely to be listed on some MEME for the time being. But the fact is that in less than 2 days, Binance decided to launch the JELLY contract, and there is obviously a hidden story.
Moreover, this is not the first time Hyperliquid has encountered similar problems. On March 13, a whale using 50x leverage opened a long order of ETH worth about $300 million on Hyperliquid, with a maximum floating profit of $8 million. However, the user subsequently withdrew most of the principal and profits, causing the liquidation price to be pushed up, and the position was eventually liquidated, with a net profit of about 1.8 million USDC. However, the platforms insurance fund (HLP Vault) suffered a loss of about $4 million. Hyperliquid Vault data shows that after the whale actively triggered the liquidation mechanism, HLP lost a total of $3.45 million.
In response, Hyperliquid announced that it will adjust leverage limits to optimize liquidation management and enhance market buffer capacity during large-scale liquidations. The maximum leverage of BTC will be adjusted to 40 times, and the maximum leverage of ETH will be adjusted to 25 times.
Combining the scale of Hyperliquid and the price performance of Hype, as a TGE project in 24 years, its Perp DEX is a real on-chain demand. In the cryptocurrency circle, being criticized by thousands of people is not terrible, but being irreplaceable is the trump card.
