Hyperliquid Incurs a $4 Million Loss From A Single Liquidation

A high-leverage whale liquidation on Hyperliquid led to a $4 million loss for the HLP fund. Meanwhile, blockchain analysts detected suspicious transactions worth hundreds of millions of dollars, raising concerns about market manipulation and money laundering. Did traders intentionally exploit Hyperliquid’s liquidation mechanism?

Hyperliquid Loses $4 Million Due to an Unusual ETH Long Position

On March 12, 2025, Hyperliquid’s HYPE token dropped 8.5% after a high-leverage whale liquidation. The event caused a $4 million loss for the HLP fund, which serves as the platform’s liquidity buffer.

According to data from Lookonchain, the whale deposited 15.23 million USDC into Hyperliquid to open an enormous ETH long position of 160,234 ETH, valued at approximately $306.85 million. By using leverage ranging from 13.5x to 19.2x, the trader controlled hundreds of millions of dollars in assets with only $23 million in actual capital.

Initially, the position showed an unrealized profit of $8 million. However, after the whale withdrew 17.09 million USDC, the margin level dropped significantly, triggering Hyperliquid’s automatic liquidation system. Despite being liquidated, the trader still walked away with a $1.86 million profit, while the HLP fund absorbed a $4 million loss.

Learn more: What is Hyperliquid?

What Happens Next for Hyperliquid?

This liquidation raises concerns about potential loopholes in Hyperliquid’s risk management system. Some traders suspect that sophisticated strategies were used to exploit the liquidation mechanism for profit. However, the overall risk remains limited, as the $4 million loss accounts for only 1% of Hyperliquid’s total value locked (TVL) and approximately 6.6% of its total historical profits, which stand at $60 million.

One possible exploit involves deliberately lowering the margin level to trigger a forced liquidation. A trader could open an oversized position, let it gain unrealized profits, and then withdraw margin funds to prompt an automatic liquidation. If they hold an opposing position on another platform, they could capitalize on the price swings caused by the liquidation event.

Regarding commentary and questions on the 0xf3f4 user’s ETH long:

To be clear: There was no protocol exploit or hack.

This user had unrealized PNL, withdrew, which lowered their margin, and was liquidated. They ended with ~$1.8M in PNL. HLP lost ~$4M over the past 24h. HLP’s…

— Hyperliquid (@HyperliquidX) March 12, 2025

Although Hyperliquid has not confirmed any fraudulent activity, the platform has adjusted leverage limits to prevent large-scale liquidations. However, questions remain about whether these measures are truly effective in preventing market manipulation.

What is Hyperliquid?

Hyperliquid HYPE is an advanced trading platform built to revolutionize the way users engage with digital assets. It integrates state-of-the-art technology to provide an intuitive, high-performance trading environment that caters to both retail and institutional traders. By utilizing a sophisticated matching engine, Hyperliquid ensures lightning-fast trade execution with minimal slippage, allowing users to buy and sell assets with unmatched precision.

The platform also employs deep liquidity pools and real-time order book updates to maintain a frictionless trading experience. With a user-friendly interface, automated risk management tools, and seamless one-click trading, Hyperliquid empowers traders to navigate the digital asset market efficiently and securely.