By reasoning through AI engines, the behavior process of this event can be summarized in key points as follows:
Research indicates that whale clients may trigger liquidation profits by reducing margin, but the specific mechanisms are complex.
Assuming initial margin of $17 million, 50x leverage bullish on ETH, withdrawing $8 million when the price rises from $1900 to $2140.
Evidence suggests that clients actively cause liquidation of positions after withdrawal, resulting in market volatility, with AI estimating total trading profits of about $107 million. However, in reality, due to market slippage and lack of counterparties, the entire leveraged position did not yield such outrageous profits.
Following the complete trading AI simulation thinking process:
Background and Operational Overview
The whale client used an initial margin of $17 million at the Hyperliquid exchange, with 50x leverage bullish on ETH (Ethereum), opening a position when ETH was priced at $1900. When the ETH price rose to $2140, the client withdrew $8 million of margin and unrealized profit, subsequently actively triggering a massive position liquidation, causing market volatility. We will analyze in detail whether this process can achieve profitability based on Hyperliquid's liquidation mechanism.
2. Trading Process Analysis
Opening Phase:
The initial margin is $17 million, with leverage of 50x, theoretically controlling a position value of $17 million × 50 = $850 million.
Opening position at a price of $1900/ETH, calculating the number of ETH that can be purchased: $850 million / $1900 ≈ 447,368 ETH.
Price Increase and Withdrawal:
When the ETH price rises to $2140, the position value is 447,368 × $2140 ≈ $957 million.
Unrealized profit is $957 million - $850 million = $107 million, total equity is $17 million + $107 million = $124 million.
The client withdraws $8 million from the isolated margin account, leaving remaining margin of $17 million - $8 million = $9 million.
Liquidation Trigger:
Hyperliquid's liquidation mechanism indicates that the maintenance margin is typically half of the initial margin, but at the current price, the required initial margin based on the current position value and leverage is calculated as $957 million / 50 ≈ $19.147 million.
Maintenance margin is approximately $19.147 million × 0.5 = $9.5735 million.
After withdrawal, the client's isolated margin drops to $9 million, less than the maintenance margin of $9.5735 million, triggering liquidation.
During liquidation, the exchange sells the position at a price of $2140/ETH, and the proceeds of $957 million are used to repay $833 million in loans (initial loan was $850 million - $17 million), with the remaining $124 million returned to the client's account.
Profit Analysis
After liquidation, the client account balance is the previously remaining $9 million + liquidation surplus of $124 million ≈ $133 million.
The client had previously withdrawn $8 million to an external wallet, with total funds of $133 million + $8 million = $141 million.
Initial investment is $17 million, net profit is $141 million - $17 million ≈ $124 million, but the actual profit core is trading profit of $107 million, plus withdrawn $8 million.
Unexpected Details
Interestingly, the client actively triggered liquidation by withdrawing margin, a strategy that not only leveraged the profits from rising prices but could also influence the behavior of other traders through market volatility, amplifying their profit potential.
Event detailed reasoning report based on complete trading AI simulation
Introduction
Recently, an event at the Hyperliquid exchange attracted attention, where a whale client, using 50x leverage, extracted margin and triggered liquidation amid ETH price fluctuations, causing market volatility. This report will analyze the implementation process of this operation in detail and assess whether the client profited from it, based on Hyperliquid's liquidation mechanism for calculations and reasoning.
Methods and Data
Based on the information provided by the user, the initial margin is $17 million, with 50x leverage bullish on ETH, withdrawing $8 million margin and unrealized profit when the price rises from $1900 to $2140, subsequently triggering liquidation. This report will reference Hyperliquid’s official documentation and relevant analysis to explore the liquidation mechanism and potential profitability.
Detailed Calculation Process
1. Opening Position Analysis
Initial Conditions: Margin $17 million, Leverage 50x, ETH Opening Price $1900.
Position value calculation: Leverage of 50x means the controlled position value is $17 million × 50 = $850 million.
Number of ETH: $850 million / $1900 ≈ 447,368 ETH, consistent with the opening scale.
2. Price Increase and Equity Changes
Price rises to $2140: Position value is 447,368 × $2140 ≈ $957 million.
Unrealized Profit: $957 million - $850 million = $107 million.
Total Equity: Initial margin $17 million + unrealized profit $107 million = $124 million.
3. Impact of Margin Withdrawal
Withdrawal of $8 million: The user withdraws $8 million from the isolated margin account, leaving remaining margin of $17 million - $8 million = $9 million.
Account Status: After withdrawal, account cash balance is $9 million, unrealized profit $107 million, total equity is $9 million + $107 million = $116 million.
4. Liquidation Mechanism Analysis
According to Margining | Hyperliquid Docs, isolated margin can be added or removed at any time, and maintenance margin is typically half of the currently required initial margin.
Current required initial margin: Based on the current position value of $957 million and 50x leverage, it is calculated as $957 million / 50 ≈ $19.147 million.
Maintenance Margin: $19.147 million × 0.5 ≈ $9.5735 million.
Liquidation Conditions: After withdrawal, isolated margin $9 million < maintenance margin $9.5735 million, triggering liquidation.
5. Liquidation Process
Liquidation Price: Assuming liquidation at $2140/ETH, selling 447,368 ETH, proceeds of $957 million.
Debt Repayment: Initial loan of $850 million - $17 million = $833 million, repaid from liquidation proceeds.
Remaining Funds: $957 million - $833 million = $124 million returned to client account.
6. Client Fund Flow
Before withdrawal: Account has $17 million margin and $124 million equity.
After withdrawal: External wallet increases by $8 million, remaining account balance of $9 million cash + unrealized equity.
After liquidation: The account receives a liquidation surplus of $124 million, total account balance is $9 million + $124 million = $133 million.
Total Funds: External Wallet $8 million + Account $133 million = $141 million.
7. Profit Assessment
Initial Investment: $17 million.
Net Profit: Total Funds $141 million - Initial Investment $17 million ≈ $124 million.
Core profit sources: Trading profit of $107 million (selling price - buying price) + withdrawn $8 million, overall strategy amplifies market impact by triggering liquidation, potentially leading to further profits.
Key Financial Data
Project
Amount (USD)
Initial Margin
17,000,000
Opening Position Value
850,000,000
Loan Amount
833,000,000
Liquidation Price (per ETH)
2,140
Total Liquidation Value
957,367,520
Unrealized Profit
107,367,520
Withdrawal Amount
8,000,000
Maintenance Margin (calculated value)
9,573,675.20
Final Account Balance (after liquidation)
133,000,000
Total Funds (including withdrawal)
141,000,000
Conclusion
Research indicates that clients triggered liquidation by withdrawing margin, netting a profit of about $124 million, with core profits from trading of $107 million plus withdrawn $8 million. This operation leveraged Hyperliquid's isolated margin mechanism and price increase, balancing risks and rewards, with market volatility potentially amplifying its effects.
Key Quotes
Margining Hyperliquid Docs
Liquidations Hyperliquid Docs
Hyperliquid Review Bitdegree
Hyperliquid Withdraw Guide
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Actual Discussion
The above AI simulation of complete trading reasoning indicates that the whale client reduced isolated margin below maintenance margin by withdrawing margin, actively triggering liquidation, and profiting from rising prices. At the same time, the liquidation process may cause market volatility due to large sell orders, affecting other traders and indirectly increasing client profits. The success of this strategy relies on the precise use of price trends and liquidation mechanisms, which carries high risk.
Personal analysis: If this whale client simultaneously opened a bearish bet contract on ETH at a CEX exchange, his actual profits would far exceed the $1.85 million reported in the news, as betting on contracts from CEX centralized exchanges would be his primary source of income.
