$XPL's massive liquidation event on HyperLiquid revealed how whales exploit mechanism loopholes and insufficient liquidity to conduct 'liquidity hunting' in DeFi derivatives trading, which retail investors should take heed of. This article is derived from a piece by K2 Kai, organized and written by Deep Tide TechFlow. (Background: 200% explosion in five minutes! HyperLiquid showcases bloody short squeeze on XPL, how do whales hunt the market?) (Background information: Conversation with HyperLiquid founder Jeff: How 11 people built 'On-chain Binance') This massive liquidation of $XPL on HyperLiquid was not an accident; the previous JELLYJELLY incident was remarkably similar. This is not a simple market fluctuation but an audacious 'liquidity hunting' operation that precisely exploited the weaknesses of mechanisms, human nature, and market structure. According to on-chain data monitoring, the key process of this event is as follows: 05:35 AM: A whale with address 0xb9c…6801e suddenly injected a huge amount of USDC into HyperLiquid and opened long positions on XPL tokens with 3x leverage. Its fierce buying momentum instantly emptied the entire order book, causing the XPL price to begin a vertical surge. 05:36 - 05:37: Under the powerful lifting by the whale, the XPL price soared from nearly $0.6 to about $1.80 in just about 2 minutes, with an increase of over 200%. The sharp price rise 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 one minute. At the same time, two other cooperating whale addresses also took profit at the peak. In total, these three addresses profited nearly $38 million. Post-event holdings: It is worth noting that after completing the main profit-taking operation, the whale still held up to 15.2 million XPL long positions, worth over $10.2 million, indicating that it might wish to continue influencing subsequent market trends. A total of 4 main addresses participated in the $XPL hedging operation, accumulating a profit of $46.1 million (Source: @ai_9684xtp). Let's take a look at how this targeted strike was accomplished? The process was clearly divided, and the techniques were seasoned. On-chain data shows that at least 4 whale addresses participated in this strike, pulling away $46.1 million: Utilizing liquidity disadvantages: Why XPL? Because it is a pre-market contract with very few players, its liquidity pool is as shallow as a small puddle. In this environment, the price control rests almost entirely with the amount of capital. The whale used 3x leverage to directly sweep away the open orders, leveraging this structural asymmetrical advantage to move the entire market with relatively small costs. Creating a chain reaction of liquidations: The price surge from $0.6 to $1.8 was not achieved through real money but rather by using initiating funds; the true 'fuel' was all the short sellers. Let me explain this 'death spiral': the whale raises the price with large orders -> your short position gets liquidated -> the system forces you to buy to close -> your buy orders further push up the price -> the next short's liquidation point also arrives... When the snowball rolls to its maximum, the whales calmly sell their chips at high levels to these passive buyers, completing the harvest. Highly coordinated operations: The clear flow of funds on-chain reveals that this was not a solo operation. At least four addresses coordinated in terms of fund sources, building rhythm, lifting actions, and selling rhythm, all appearing to come from the same training institution. Amplified platform design flaws: HyperLiquid's internal pricing mechanism did not connect to external oracles, which means that prices here are determined entirely by on-site players. Whales are exploiting this, acting freely in this shallow area. Ironically, a few months ago, the JELLYJELLY incident also had the same formula and the same flavor. 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 heavily sold off JELLYJELLY, causing a price crash that forced the platform's liquidity pool (HLP) to passively short. Subsequently, that address quickly bought back, raising the price and resulting in 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 incident indicates that its system still has significant vulnerabilities when facing attacks initiated by whales exploiting financial and mechanism loopholes. Extended Reading: HyperLiquid's Terrifying Night) Whales Play 'Malicious Liquidation' Again, Officially Lost Tens of Millions, Funds Fleeting and Risk of Being Cut Off If you don't want to become the next 'meal on the table', please refer to the following points. This XPL incident once again verifies a harsh reality: in markets with insufficient liquidity, retail investors are the natural 'counterparty' and 'fuel' for whales. 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 small token leveraged trading. The water is shallow, and there are few fish, making it easy to catch. If you must participate, treat it as high-risk speculation and invest funds that can be lost at any time; do not harbor the illusion of 'catching a big trend'. Leverage is the noose that hangs you. In such markets, 2x leverage and 20x leverage are no different; it can all happen in an instant. Always keep your position within the range you can accept losses, for example, 5% of your total funds. Surviving is more important than anything else. Be wary of abnormal market orders and fund flows. When you see a token soaring for no reason, and sell orders being torn apart like paper, don’t FOMO, run! That’s not an opportunity to get rich; it’s the beginning of a slaughter. Capable traders can pay attention to on-chain data (refer to on-chain data platforms like Onchain Lens, Lookonchain, etc.), and massive funds flowing into specific platforms before an attack is a common danger signal. Don't place bets in a casino with opaque rules. Before playing, take five minutes to check if the platform has oracles and sufficient trading depth. A good platform will find ways to protect you, rather than letting the rules become weapons for others to attack you. After the incident, HyperLiquid released an official statement that consisted of just one sentence: 'This has nothing to do with us; please reflect on yourself.' Don’t gamble your life savings on an illusion. Whales earn money from information asymmetry and loopholes in the rules, while many lose money chasing fantasies of getting rich. Stop chasing opportunities that don’t belong to you, and focus your energy on risk control; that is more important than anything else. Finally, remember one thing: in this jungle, the most dangerous thing is never the rise and fall of prices, but those hiding behind the rules, treating you as prey...