Written by: KarenZ, Foresight News
At 5:50 AM on August 27, a thrilling extreme market occurred on the decentralized derivatives trading platform Hyperliquid: its listed token XPL (pre-contract) surged nearly 200% in just 5 minutes, and then quickly fell back, leading to large-scale short liquidations and community controversies.
Event recap: A crazy 5 minutes, the market like a roller coaster.
According to Hyperliquid's market data, XPL's price began to surge rapidly at 5:50 AM Beijing time on August 27, skyrocketing from around $0.6 to a peak of $1.8, with an increase of nearly 200% in just a few minutes. However, this frenzy did not last long—the price fell back to its original state within minutes of reaching its peak, and is currently fluctuating around $0.061.
According to Coinglass data, the short liquidation amount for XPL on Hyperliquid reached $17.67 million in the last 4 hours.
It's worth noting that at the same time, on centralized exchanges like Binance and Bitget, which launched pre-contracts for XPL, there was no significant price fluctuation for XPL. This discrepancy has raised community suspicions of price manipulation.
Behind the scenes: Two addresses profited $27.5 million.
Further tracking of on-chain data via HypurrScan shows that the address starting with 0xb9c began laying out plans two days ago (August 24), initially depositing a total of 10.98 million USDC into Hyperliquid through 6 transactions, and then started to ambush XPL long positions, depositing another 4.993 million USDC into Hyperliquid at 5:35 AM today.
Subsequently, the address starting with 0xb9c began placing multiple long orders for XPL at 5:36 AM on August 27 (with most single orders ranging from tens of thousands to hundreds of thousands of dollars), and started closing long positions at 5:53 AM. When XPL dropped to around $0.6, this address once again went long on XPL. Currently, the position value of the XPL contract for the address starting with 0xb9c on Hyperliquid is $8.28 million.
Around 08:10 AM, the address starting with 0xb9c made two transactions, 'withdrawing' nearly 600,000 USDC, and has not taken further actions since.
According to @ai_9684xtpa's analysis, this address directly swept the entire order book, squeezing all short positions (mainly 1x hedging positions), earning $16 million in just one minute.
According to analysis by Yu Jin, the XPL liquidator on Hyperliquid likely ambushed long positions through two wallets, raising the price to trigger liquidation and thus achieving a profit of up to $27.5 million. Among them, the 0xb9c address raised the XPL price, causing a chain liquidation, ultimately triggering automatic liquidation between $1.1 and $1.2. The DeBank username 'silentraven' (starting with 0xe417) has ambushed long positions of 21.1 million XPL on Hyperliquid at an average price of $0.56 in the past 3 days. After the liquidation was triggered, the position was automatically liquidated at an average price of about $1.15, making a profit of $12.5 million.
Some community users have also pointed fingers at Justin Sun. @ai_9684xtpa stated, "The rumors about Brother Sun are related to the continuous tracing of the source of funds; this address transferred ETH to a Justin Sun-related address five years ago, but there is no direct evidence proving this is Brother Sun."
Exposed core issue: Structural risks of DeFi perpetual contracts.
This incident reveals several key hidden dangers of DeFi perpetual contract platforms:
Reliance on a single oracle makes price manipulation 'easy': The price of Hyperliquid perpetual contract oracle does not rely on any external data; the funding rate is determined based on the moving average of Hyperp's marked price. As a pre-issued token, XPL relies on a single price oracle, making it susceptible to manipulation. Whales can quickly raise the price through large long positions, easily breaking through the liquidation threshold.
Lack of position concentration control: Whales can 'manipulate the market': Currently, most DeFi contract platforms do not set position limits for single users, allowing whales to influence market prices and liquidation mechanisms through large positions.
Many users believe that '1x leverage hedging' carries extremely low risk and is a stable operation, hence they relaxed their vigilance against extreme market conditions. However, in the highly volatile crypto market, even seemingly 'safe' strategies can be 'vulnerable' in the face of price manipulation and black swan events, and the large number of 1x leveraged hedging positions that were liquidated is a typical case.
@Cbb0fe stated, "In this XPL liquidation event, I executed a 10% hedging operation on my XPL token assets on the HyperliquidX platform, using 1x leverage to short and provided a large amount of collateral for protection, but ultimately still faced a loss of $2.5 million. This user stated, 'I will never touch this isolated market again.'
Insights
This 'five-minute storm' not only represents a typical case of market manipulation but also exposes the weaknesses of DeFi derivative protocols in risk control, oracle mechanisms, and position management. Without improvements, similar issues are likely to arise in other DeFi perpetual contracts or synthetic asset platforms.
For traders, it is crucial to recognize: in a crypto market lacking clear regulation and robust risk control, even seemingly sound hedging strategies can 'instantaneously go to zero' in the face of whale manipulation and extreme volatility. The 'tuition fees' of the crypto market are often expensive; respecting risks and making rational decisions are key to long-term survival.
