Are you next? Understanding the hidden traps of DeFi derivatives trading from the XPL incident? What you see as an opportunity, the whales see as prey!
The massive liquidation of XPL on HyperLiquid is not an accident; it is reminiscent of the previous JELLYJELLY incident. It is not a simple market fluctuation but a blatant 'liquidity hunting,' precisely exploiting the weaknesses of mechanisms, human nature, and market structure.
According to on-chain data monitoring, the core process of this event is as follows:
At 05:35: A whale with the address 0xb9c…6801e suddenly injected a huge amount of USDC into HyperLiquid and opened a long position on XPL tokens with 3x leverage. Its fierce buying momentum instantly cleared the entire order book, causing the XPL price to start skyrocketing.
05:36 – 05:37: With the strong pull of this whale, the price of XPL skyrocketed from nearly $0.6 to a peak of about $1.80 in just about 2 minutes, an increase of over 200%. The sharp rise in price triggered massive liquidations of short positions, with address 0xC2Cb losing about $4.59 million and 0x64a4 losing about $2 million.
Quick profit taking: When the price reached its peak, the whale quickly closed its position, locking in about $16 million in profit in just 1 minute. Meanwhile, two other cooperating whale addresses also took profits at high positions. Ultimately, these three addresses collectively profited nearly $38 million.
Post-event positions: It is worth noting that after completing major profit-taking operations, this whale still holds up to 15.2 million XPL long positions, valued at over 10.2 million USD, indicating that it may wish to continue influencing the subsequent market trends.
A total of four major addresses participated in the $XPL hedging strike, collectively profiting $46.1 million (source: @ai_9684xtpa).
Let's see how this targeted strike was carried out.
Exploiting liquidity disadvantages: The process is clearly defined, and the methods are seasoned. On-chain data shows that at least four whale addresses participated in this strike, taking away $46.1 million:
Exploiting liquidity disadvantages: Why XPL? Because it is a pre-market contract, not many people play it, and the liquidity pool is as shallow as a small puddle. In this environment, price control almost entirely depends on the size of the capital. Whales using three times leverage to directly clear the hanging orders is precisely taking advantage of this structural asymmetry, using relatively small costs to leverage the entire market.
Creating a chain reaction of liquidations: The price surge from $0.6 to $1.8 was not driven by real money; the whales only used initial capital, and the real fuel was all the short sellers.
Let me explain this 'death spiral': The whale drives up the price with large orders -> your short position gets liquidated -> the system forces you to buy to cover -> your buy order further pushes up the price -> the next short's liquidation line is reached... When the snowball rolls to its maximum, the whales calmly sell their chips at high prices to these passive buyers, completing the harvest.
Highly coordinated operations: On-chain capital flow clearly reveals that this is not individual combat. At least four addresses have synchronized in funding sources, position building rhythm, price pulling actions, and exit timing, as if they all came from the same training institution.
Amplified platform design flaws: HyperLiquid's internal pricing mechanism did not connect to external oracles, meaning that here, the price is entirely determined by the people in the arena. Whales are taking advantage of this to do as they please in this shallow water. Ironically, the JELLYJELLY incident a few months ago had the same formula and taste.
JELLYJELLY incident review
This XPL incident is not an isolated case. On March 26 of this year, HyperLiquid experienced a similar price manipulation incident involving the JELLYJELLY token. At that time, a certain whale address first dumped JELLYJELLY heavily, causing the price to plummet, forcing the platform's liquidity pool (HLP) to passively short. The address then quickly bought back, raising the price, leading to HLP's treasury losing nearly $12 million. Afterward, HyperLiquid had to delist that trading pair and compensate the affected users.
Although the platform updated its leverage and liquidation mechanisms after the JELLYJELLY incident, the occurrence of the XPL event indicates that its system still has significant vulnerabilities when facing attacks by whales exploiting funding and mechanism loopholes.
If you don’t want to become the next 'meal,' consider the following points.
This XPL incident once again validates a harsh reality: in a market with insufficient liquidity, retail investors are the whales' natural 'counterparty' and 'fuel.' To avoid becoming the next victim of hunting, the following points are crucial:
Don't play with sharks in a 'small pond.'
Do not easily participate in pre-market contracts, new coins, or leveraged trading of small coins. The water is shallow, the fish are few, and it's easy to catch. If you must participate, treat it as high-risk speculation, investing funds that could go to zero at any time, and do not harbor the illusion of 'catching a big trend.'
Leverage is the rope that hangs you.
In such a market, 2x leverage and 20x leverage make no difference; it can all happen in an instant. Always keep your position within a range you can calmly accept losses, such as 5% of your total funds. Surviving is more important than anything else.
Beware of abnormal order books and capital flows.
When you see a coin inexplicably take off vertically, and the sell orders are shredded like paper, don’t FOMO, just run! That’s not an opportunity to get rich; it’s the start of a slaughter. Capable traders can pay attention to on-chain data (refer to on-chain data platforms like Onchain Lens, Lookonchain, etc.), as a large influx of funds into specific platforms before an attack is a common danger signal.
Don't place bets in a casino where the rules are not transparent.
Before playing, spend five minutes checking whether this platform has oracles and sufficient trading depth. A good platform will find ways to protect you, rather than letting the rules become a weapon for others to attack you. After the incident, HyperLiquid released an official statement, which was only one sentence: 'It has nothing to do with us; reflect on yourself.'
Don't bet your life savings on a fantasy.
Whales make money from information asymmetry and loopholes in rules, while many people lose money from the fantasy of getting rich. Stop chasing opportunities that do not belong to you, and focus your energy on risk control, which is better than anything else.
Finally, remember this: in this jungle, the most dangerous thing is not the rise and fall of prices, but those who hide behind the rules and treat you as prey. Don't be prey.
