In a stunning turn of events reminiscent of the GameStop saga, the crypto platform Hyperliquid faced an existential crisis in March 2025 when a whale investor exploited systemic weaknesses to threaten a $230 million treasury. The incident saw retail traders engage in a frenzy, pushing the asset JellyJelly up by 429% within an hour. Hyperliquid's ability to maintain its decentralization principles was contested as it faced potential liquidation risks. This highlighted vulnerabilities like weak position limits and manipulative oracles, raising questions about the future stability of decentralized trading.
This wasn't just a trading operation but a surgical strike against systemic weaknesses, pushing Hyperliquid into a dilemma: either watch its $230 million treasury face liquidation risk or abandon its "decentralization" principles by using emergency measures to intervene in the market.
As funds continued flowing out of the Hyperliquid Vault, JellyJelly's liquidation price would be further suppressed, creating a death spiral. The attacker precisely exploited four critical vulnerabilities in Hyperliquid's system: Lack of real position limits for illiquid assets, weak oracle mechanisms against manipulation, automatic position inheritance system, absence of circuit breakers.
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