TLDR
- Hyperliquid temporarily stopped withdrawals and deposits after a trader manipulated the price of memecoin POPCAT.
- Blockchain analytics firm Arkham reported that $5 million in bad debt from POPCAT was transferred to Hyperliquid’s liquidity provider.
- The trader opened leveraged positions on POPCAT with 19 wallets, resulting in an exposure of $25.5 million.
- The price of POPCAT fell sharply, which led to the liquidation of the trader’s positions and caused significant losses.
- Hyperliquid’s bridge was inactive for over 20 minutes after the liquidations, disrupting the platform’s operations.
Hyperliquid temporarily halted deposits and withdrawals on Wednesday after a trader attempted to manipulate the price of memecoin POPCAT. The move followed a series of liquidations, resulting in significant losses for the platform’s liquidity provider. The platform’s bridge was reportedly stopped for over 20 minutes, causing significant disruption to trade.
$5 million in bad debt moves to Hyperliquid’s liquidity provider
Blockchain analytics company Arkham reported that approximately $5 million in bad debt related to POPCAT was transferred to Hyperliquid’s liquidity provider (HLP). This transfer took place shortly before the suspension of withdrawals, raising concerns about the stability of the platform. The situation escalated when the trader, who removed 3 million dollars from OKXopened leveraged positions on POPCAT with 19 wallets.
The trader distributed the funds between the wallets and took on approximately $25.5 million in exposure. When POPCAT’s price dropped, the trader’s positions were liquidated. HLP inherited the remaining positions and suffered losses totaling $4.95 million when those positions were closed.
Conor Grogan, a former Coinbase executive, confirmed that the bridge was suspended during the liquidation. Hyperliquid has not provided a timeline for when withdrawals and deposits will be restored. The event drew attention to the vulnerability of decentralized exchanges (DEX), especially in high leverage and low liquidity situations.
Manipulation scheme leads to liquidations on Hyperliquid
An on-chain analyst, MLMabc, revealed that the trader tried to manipulate the price of POPCAT by placing large buy orders worth $20 million. The orders, set at $0.21 per token, were placed around 14:45 CET. These orders temporarily raised the price before the trader’s positions were liquidated.
When the price of POPCAT dropped sharply, the trader’s strategy quickly paid off. The resulting market movement led to the liquidation of the 19 wallets, causing heavy losses. The platform’s bridge became inactive shortly after these liquidations, further limiting the ability to move funds.
Hyperliquid’s decision to halt transactions was aimed at stabilizing the platform and preventing further losses. This is not the first incident of market manipulation on the platform. In March, a similar situation involving memecoin JELLY JELLY led to significant unrealized losses.
This latest disruption has raised concerns about the stability of decentralized exchanges and the risks associated with leveraged trading. Hyperliquid’s decision to halt withdrawals was seen as a necessary measure to address the immediate risks of price manipulation.
