XPL flash crash investigation: 16 related wallets withdrew margin in advance, causing Hyperliquid HLP to take over XPL long positions and lose $556,000

Odaily report: filo, a member of the liquidity service provider Quote Markets team, published a post-mortem of 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 and completed the sale within about 75 minutes, losing approximately $555,787, equivalent to 55.6% of the liquidation vault's own capital.

The investigation shows that 14 of the 16 wallets had links in funding sources or trading behavior, among which 12 wallets withdrew funds in advance, contributing 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 this incident on Hyperliquid, with a combined loss of approximately $711,000. In addition, XPL had already fallen about 6% before the first liquidation on Hyperliquid occurred, so the liquidation was not the starting point of this crash, and Binance perpetual contracts also showed significantly larger aggressive selling volume in the initial stage.