In the crypto world, being pointed at by many is not scary; being irreplaceable is the trump card.
Written by: Bright, Foresight News
In the first half of the year, Hyperliquid, once questioned and FUDed, has risen again.
On May 22, as BTC broke through the 110,000 USD mark, HYPE surpassed 30 USDT, with a 24-hour increase of 14.79%, and a total FDV standing at 29 billion USD, rising to the 14th position in cryptocurrency market capitalization. In contrast, a whale shorted HYPE worth 57.14 million USD with 5x leverage around 20.4 USD on May 8, and that position is currently facing a floating loss of 18.8 million USD. To prevent liquidation, the address has added margin three times, the latest being a 'desperate' increase of 2.04 million USD USDC two hours ago to avoid forced liquidation.
Meanwhile, Hyperliquid's official announcement stated that its platform data set multiple historical records today, including total open interest (OI) reaching 8.9 billion USD, 24-hour trading fees reaching 5.4 million USD, and a total USDC locked amount of 3.2 billion USD.
It's worth noting that two months ago, Hyperliquid was still mired in a near-bankruptcy crisis and 'decentralization' FUD. Bitmart founder Arthur Hayes directly attacked Hyperliquid on X, stating 'HYPE will return to square one' and urging everyone to 'stop pretending Hyperliquid is decentralized.'
On-chain Perp demand remains strong
After the JELLY short squeeze event calmed down, more and more whales began to choose Hyperliquid. According to data from The Block, Hyperliquid had already accounted for about 9% of Binance's contract trading volume for two consecutive months before the short squeeze event occurred.
According to Dune data, Hyperliquid is experiencing rapid growth in both trading volume and user numbers. How is it that whales seem to have forgotten about the short squeeze event?
Hyperliquid's choice is not based on a strictly decentralized ideology, but prioritizes capital efficiency and protocol security. As Zuo Ye wrote in the article (Hyperliquid: 9% of Binance, 78% Centralized) - in the series of Perp DEXs, Hyperliquid's innovation lies not in architectural innovation, but in using a 'slightly centralized' approach to learn from GMX's LP tokenization and, combined with token listings and airdrop strategies, continuously incentivize market speculation, successfully capturing the derivatives market that CEXs firmly occupy. This is not a defense of Hyperliquid, but the underlying principle of Perp DEX; absolute decentralized governance cannot respond to black swan events, and quick responses require a sword bearer.
Thus, whales have chosen to trust the 'sword bearer' Hyperliquid, which primarily uses smart contracts and supports node voting, rather than mature CEXs. The following three factors are key to Hyperliquid's emergence from the shadow.
1. Demand for anonymity. Many whales and large holders place great importance on personal privacy protection and also do not want to be subject to potential withdrawal and transfer restrictions from centralized exchanges.
2. Good liquidity. Only large pools can accommodate whales flipping positions. In fact, only a few leading centralized exchanges can match Hyperliquid's liquidity.
3. Public positions. Figures like James and other KOLs can form a cycle of 'money and influence' - leveraging Hyperliquid's publicly available large positions and profits to enhance their influence, and then using that influence to further prompt retail investors to follow suit, thereby affecting market direction. In traditional CEXs, KOLs still need to connect to the exchange's API to show their positions.
During this round of increases, whales in Hyperliquid were very active. Previously, there was the '50x Insider Guy' (before HYPE modified leverage) with extreme operations, followed by meme legend James Wynn making a large, clear long position. Particularly, the latter made over 40 million USD in profit through nearly 1 billion USD in long positions during BTC's rise to a historical high.
At the same time, to solve the issues of stablecoin yield and outflow, Hyperliquid launched its native stablecoin HUSD, which combines two core insights: integrating the valuation asset (stablecoin) used for trading and the cash flow it generates into the trading platform system. The end result is a stablecoin with the nature of a 'public good', transforming the originally static reserve interest into active, compound growth within the Hyperliquid ecosystem.
Review: JELLY Short Squeeze Shadow
Let's turn back the clock to the evening of March 26, when the meme coin JELLYJELLY faced a short squeeze, surging 429% within an hour. The Hyperliquid Vault took over a wallet and liquidated the JELLYJELLY short position, which had once incurred a floating loss of over 10.5 million USD. At that time, if JELLYJELLY reached 0.15374 USD, the Hyperliquid Vault would lose all of its 230 million USD funds; as funds flowed out of the Hyperliquid Vault, it would further lower the liquidation price of JELLYJELLY.
After the incident, OKX and Binance announced the launch of JELLYJELLY perpetual contracts that night, while Hyperliquid quickly delisted JELLYJELLY after Binance and OKX launched futures contracts, and the massive loss short positions of JELLYJELLY in Hyperliquid Vault have been settled.
Just when the onlookers thought Hyperliquid was conceding defeat, the situation experienced a 'surprising yet expected' reversal. According to historical data from Hyperliquid's official website, the JELLYJELLY short position taken over by Hyperliquid Vault was already closed at 0.0095 USD at 11:15 PM, and the anticipated loss of over 10 million USD did not occur; HLP Vault even made a profit of 703,000 USD on that position. Subsequently, Hyperliquid announced that after discovering evidence of suspicious market activities, a meeting of validators was convened to vote on the decision to delist the JELLY perpetual contract. All users, except for the marked addresses, will receive full compensation from the Hyper Foundation.
According to Parsec panel data, within hours of the Jelly liquidation event, the USDC net outflow from the Hyperliquid platform reached 140 million USD. Previously, during the ETH whale long liquidation event around March 12, Hyperliquid's total USDC net outflow approached 300 million USD over four days. From February 26 to March 26, Hyperliquid's USDC balance also decreased from about 2.5 billion USD to 2.07 billion USD.
In response to this incident, many individuals, led by various CEX CEOs, have questioned Hyperliquid, expressing that the operation of Hyperliquid, which claims to be a decentralized exchange, resembles an offshore CEX without KYC/AML, and its immature operations could become FTX 2.0. However, some have pointed out that the leading exchanges are the most suspicious instigators behind this siege against Hyperliquid. User off_thetarget even revealed on X that as early as March 24, someone contacted him to help push for JELLYJELLY's listing on Binance. After assisting in contacting the listing team, the feedback was that it was temporarily unlikely to list some MEME. Yet, the fact is that less than two days later, Binance decided to list the JELLY contract, indicating that there were obvious hidden circumstances.
Moreover, this is not the first time Hyperliquid has encountered similar issues. On March 13, a whale using 50x leverage opened an ETH long position worth approximately 300 million USD on Hyperliquid, with maximum floating profits reaching 8 million USD. However, the user subsequently withdrew most of the principal and profits, leading to an increase in the liquidation price, and the position was eventually liquidated, netting approximately 1.8 million USDC. The platform's insurance fund (HLP Vault) thus bore a loss of about 4 million USD. Data from Hyperliquid Vault shows that after the whale actively triggered the liquidation mechanism, HLP lost a total of 3.45 million USD.
In response, Hyperliquid announced it would adjust leverage limits to optimize liquidation management and enhance market buffering during large-scale liquidations. The maximum leverage for BTC will be adjusted to 40x, and for ETH, it will be adjusted to 25x.
Considering Hyperliquid's scale and Hype's price performance, as a project with a 24-year TGE, its role as a Perp DEX is a solid on-chain necessity. In the crypto world, being pointed at by many is not scary; being irreplaceable is the trump card.
