It’s been a chastening week for crypto short sellers.
As the crypto market ripped higher, one trader’s bet against Hype, the native token of Hyperliquid, an onchain derivatives exchange, turned into a massive $23.5 million loss, marking one of the single biggest liquidation losses this year.
Onchain data from HyperDash, a platform that tracks trades on Hyperliquid, shows the trader began building the position on April 29. The trader borrowed five times his capital to short $30 million worth of Hype.
Short selling involves borrowing tokens to sell higher and buy back lower and, pocketing the difference for a profit.
But when leverage is involved, even though it amplifies the trader’s position size by giving them more money to trade, it exposes them to outsized losses if the market moves even slightly in the wrong direction.
By borrowing funds at a five-to-one ratio of the trading capital, a 1% price movement in the wrong direction means a 5% loss on the trader’s position.
Unfortunately for this Hype short trader, the token didn’t just move, it galloped.
Hype surged 90% since they opened the position, which forced them to close the trade on Friday, with $23.5 million evaporated.
This kind of wipeout has been common this month as crypto prices have made sudden moves. Earlier in the month, Bitcoin’s move above $100,000 wiped out $873 million in short positions within a day.
The crypto market caught fire this week, as Bitcoin sprinted to a new all-time high above $111,000. Shorts worth $766 million have been liquidated amid the market adding more than $170 billion to its total value.
Meanwhile, traders with more optimistic bets are sitting on huge profits.
This week, a trader who goes by James Wynn, popular for audacious memecoin trades, borrowed an amount that was 40 times the posted trading capital to enter a long position worth $1 billion on Bitcoin.
Wynn has also opened a $60 million long position on Ethereum.
But for Hype short sellers, the pain is already at maximum levels. The token’s price has tripled since April 9 and set a new all-time high of $36 on Friday.
Hyperliquid is the biggest onchain perpetuals exchange with a market value of $11 billion. Its nearest rivals, dYdX and Arkham, aren’t worth up to $1 billion combined.
Crypto market movers
Bitcoin is down 2.6% over the past 24 hours and is at $108,516.
Ethereum is down 4.1% over the same period to about $2,545.
What we’re reading
Trump fêtes Justin Sun and other top memecoin holders as protesters decry ‘crypto corruption club’ ― DL News
Animoca Could Be Crypto’s Next U.S. Public Offering. Is It a Strong GameFi Bet? ― Unchained
Dumb strategy → insane returns — Milk Road
SafeMoon CEO Found Guilty in U.S. Crypto Fraud Trial ― Unchained
A16z leads investments as crypto startups raise $214m in one week ― DL News
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at [email protected].
