On July 29, the decentralized exchange HyperLiquid experienced an API overload incident causing confusion for many traders, financial losses, forcing the platform to proceed with refunds – a decision that sparked controversy within the cryptocurrency community.
This technical incident disrupted order updates, causing users to be unaware of their actual transaction states, while the HYPE Token was struggling to recover but still faced pressure from negative market indicators.
MAIN CONTENT
The API overload incident at HyperLiquid caused financial losses, and the platform subsequently refunded the victims.
Community reactions are divided: some praise it, while others see it as the platform's minimal responsibility.
The HYPE Token has slightly recovered, but technical indicators show that investors should remain cautious.
What scenario occurred on HyperLiquid on July 29?
The technical incident on July 29 at HyperLiquid was the result of a sharp increase in API traffic, causing user orders to be delayed in updating and leading to confusion and actual financial damage.
When transactions occur at the moment the API is overloaded, the orders are still sent to the mempool and confirmed On-chain, but the system returns an error message, causing users to think the order has failed. This leads many to inadvertently open positions without their knowledge, resulting in uncontrollable risks during the period from 14:10 to 14:47 (UTC time, i.e., 21:10 to 21:47 Vietnam time).
HyperLiquid itself has confirmed this incident and has refunded affected traders, especially those who incurred unusually high funding fees due to price volatility during that period.
“The delay in updating orders not only creates confusion for customers but also reveals potential risks for the entire risk management system of the platform.”
Quoted from the AMBCrypto platform risk report, 2025
According to the official announcement on Telegram and X channels, HyperLiquid's refund policy was constructed closely to the 'worst exit scenario' to ensure fair compensation for affected customers.
What caused the API malfunction and what are the consequences for users?
The core reason stems from a sudden spike in API traffic causing server overload, leading to slow updates in order statuses and returning inaccurate error messages.
Although the order has been recorded on the Blockchain, the system's response led customers to believe that the transaction was unsuccessful, inadvertently causing unintended positions – a highly risky factor in the inherently volatile cryptocurrency derivatives market.
“In a high-speed environment like DeFi, the delay in updating information can lead to significant but subtle losses, including both psychological and actual value.”
Dr. Nguyen Hoai Nam, blockchain expert in Vietnam, Fintech Conference 2024
The primary impact is that many users cannot determine their position status, leading to overlapping orders, uncontrolled funding costs, causing actual financial damage. This phenomenon is even more concerning when it occurs in a volatile market where liquidation or depreciation risks are always present.
How did HyperLiquid handle and compensate customers?
After recording the incident, HyperLiquid publicly apologized and announced refunds for affected traders, especially those who placed, withdrew, or deposited orders during the malfunction.
The refund policy revolves around the principle of simulating the worst-case scenario – that is, refunding based on the worst price and funding fees that traders could encounter. This aims to minimize disputes over compensation levels and maximize fairness for customers.
“Quick and transparent responses can be key to maintaining trust after a crisis, but in the long term, the infrastructure must prove actual stability.”
John Wu, CEO of Ava Labs, CoinDesk, 2024
After the event, transactions during the incident timeframe were reviewed, and all financial losses and unusual funding fees were refunded. This helped minimize direct asset damage and somewhat soothe community sentiment.
How did the cryptocurrency community react to HyperLiquid's refund move?
HyperLiquid's refund action has caused two contrasting viewpoints within the community: one praises the self-responsibility efforts, while the other considers it the minimum obligation.
Many appreciate the proactive step and demonstrate HyperLiquid's crisis management capabilities while the platform has no legal obligation to refund. Some users called this 'world-class' on X, considering it a model worth learning from for cryptocurrency exchanges.
“The reality is the industry thinks this is extraordinary only shows how bad cryptocurrency is becoming.”
Account @guru__hl on X, 2025
On the other hand, many opinions suggest that refunding after the incident is a basic mandatory standard, especially when the platform manages large user data and cash flows. Nevertheless, the community agrees that this event highlights the urgent need for infrastructure upgrades and the prevention of technical risks in the future.
“Although this is a commendable action, this incident serves as a strong warning signal to the entire industry about the weakness of the current infrastructure.”
Account @Ensemble_fi on X, 2025
Why does the API incident on HyperLiquid raise concerns about the safety of DeFi infrastructure?
When technical errors occur on decentralized exchanges with derivative products, even if the exchange refunds, trust in safe operational capabilities and large volumes is still shaken.
Unlike centralized financial organizations that often have preventive control measures, DeFi systems can sometimes be easily affected by sudden traffic spikes, slow data updates, causing spread risks throughout the ecosystem.
Many studies by Chainalysis (2024) indicate that technical incidents are the main barrier preventing many institutional investors from participating in the DeFi market. To regain their position, platforms must not only maintain well but also continuously upgrade their risk management processes and regularly conduct stress tests.
Market overview: How has the HYPE Token recovered after the crisis?
Despite technical issues, as of August 5, the HYPE Token trades around $39.39, up 1.6% on the day, indicating signs of recovery, but technical indicators still urge investors to be cautious.
The relative strength index (RSI) recorded at 43.32 – below the neutral level of 50, indicating that selling pressure still exceeds buying. The Chaikin Money Flow (CMF) indicator is at -0.20, suggesting money is flowing out of the market rather than returning strongly.
The HYPE price is moving below the middle line of the Bollinger Band, confirming that this is just a technical rebound and not yet affirming a new uptrend. Trading volume is also quite modest, not really convincing.
“Investors should prioritize risk control and only take positions when there are clear reversal signals, especially with tokens affected by technical controversies.”
Market analysis report from TradingView, August 2025
What transparency and risk management standards should DeFi exchanges aim for?
The incident at HyperLiquid emphasizes the critical need for transparency in data updates, the ability to notify account status in real-time, as well as clear, transparent, and consistent investor protection policies.
Current HyperLiquid Criteria Proposed for DeFi Exchanges Order Status Update Slow when API Overloaded Realtime, multiple backup routes, automatic alerts Error response/cancellation of transactions Error messages sometimes misleading Clear explanations, direct warnings to users Refund and compensation policies Available after incidents, criteria close to worst-case scenarios Clear from the start, with backup preventive mechanisms System testing and monitoring Not publicly available Testing stress tests, periodic audits, public results
Experiences from organizations like Binance or dYdX clearly show: the critical factor for DeFi is not just startup speed but also stability, load capacity combined with the function of protecting customer assets when unexpected incidents occur.
How can individual investors protect themselves when participating in derivative DeFi exchanges?
Facing technical difficulties in the DeFi environment is possible. Therefore, investors should proactively check and verify order statuses on wallets, prioritizing the use of platforms with reputable security certifications from independent audit organizations.
A risk management strategy with reasonable leverage should be applied, avoiding FOMO when the market fluctuates or the platform encounters errors, being cautious when receiving error messages from the system, and always prioritizing 'avoiding liquidation rather than trying to take profits at all costs.'
Only trade with volume appropriate to loss tolerance and prepare preventive measures, such as setting stop-loss orders, and always maintain transaction history to have a basis for disputes or verification.
HyperLiquid Incident: What lessons are there for the DeFi ecosystem?
The incident at HyperLiquid serves as a reminder to the industry that: Technological transparency, risk management, and investor protection policies are not just slogans but require concrete actions integrated into daily operations.
Decentralized exchanges are symbols of financial freedom and transparency; therefore, platforms need to improve in both technology and customer responsibility to strengthen their position in the eyes of institutional capital as well as the community.
Currently, industry experts evaluate that platforms committing to regular thorough testing, transparent audits, and proactive risk prevention will soon regain trust and receive larger capital flows in the next market cycles (Deloitte Blockchain Report, 2024).
Future considerations and recommendations for HyperLiquid as well as the entire DeFi industry
Looking long-term, incidents like HyperLiquid should serve as motivation to improve transaction coordination systems, establish transparent error handling processes, and increase the frequency of system testing.
Exchanges should proactively collaborate with auditors, organize disaster recovery, and continuously upgrade their capacity to forecast peak trading volumes, ensuring that traders are not abandoned as was the case recently.
At the same time, the compensation policy needs to be communicated clearly from the product consultation stage, not waiting until the crisis occurs to decide, to minimize community grievances and avoid negative impacts on Token prices.
Frequently Asked Questions
What is the main cause of the incident on HyperLiquid?
The main cause is the spike in API traffic causing the system to overload, leading to delays in updating orders and returning error messages, causing confusion for users.
How were traders affected in the recent incident?
Many unintended positions were opened without users' knowledge, leading to actual asset losses and unusually high funding fees during the error period.
How did HyperLiquid handle compensation?
The system has identified and refunded asset losses as well as unusual funding costs according to the worst-case scenarios for customers.
How did the community react to HyperLiquid's actions?
The community is divided into two streams: some appreciate the sense of responsibility, while others view it as the basic mandatory obligation of the platform.
How did the HYPE market fluctuate after the incident?
The HYPE Token has slightly recovered, but technical indicators remain negative, with signs of cash outflows rather than returning to the market.
What should DeFi platforms improve to avoid repeating incidents?
There is a need to upgrade technology infrastructure, increase the frequency of system testing, transparently communicate investor protection policies, and respond to errors promptly.
What should investors learn from this event?
Proactively manage risks, regularly check account status on the Blockchain, and only trade with appropriate volumes to prevent technical risks.
Source: https://tintucbitcoin.com/loi-api-hyperliquid-hoan-tien-than-trong/
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