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## [TL；DR]: 
The recent incident of a giant whale pulling out JELLYJELLY to encircle Hyperliquid (HYPE) caused the platform's TVL to drop from $240 million to $200 million, and the price of the HYPE token fell from $16 to $12.5.

Earlier, a whale with 50x leverage took advantage of Hyperliquid's takeover loophole to make a profit of $1.8 million, causing HLP to lose $4 million and triggering a crisis of trust.

In the short term, Hyperliquid (HYPE) faces challenges due to recent attacks and its investment value may be low, but in the long term, Hyperliquid's technical foundation and community support show long-term recovery potential and are suitable for investors with high risk appetite.

## Introduction
Since the beginning of this year, Hyperliquid has rapidly risen with its high performance and innovation, becoming a rare innovation benchmark in the Perp DEX field in this round of bull market. Its flagship product, Hyperliquid DEX, supports on-chain order book transactions, claims to be able to process 100,000 orders per second, uses a customized HyperBFT consensus algorithm, and with the stimulation of massive airdrops, the HYPE token has been continuously hyped. However, several sudden attacks in late March cast a shadow on this rising star, and it is facing a situation of declining TVL and a large number of users leaving in the near future.

Gate.io has recently published several blog posts, such as "<a href="https://www.gate.io/blog/6539/what-is-hyperliquid-where-can-I-buy-hype-token" target="_blank" title="What is Hyperliquid? Where can I buy HYPE tokens?">What is Hyperliquid? Where can I buy HYPE tokens?</a>", which have already given a detailed introduction to Hyperliquid. Readers unfamiliar with the basic background can click here to view it. I will not go into details here. This article focuses on analyzing two major hunting incidents that Hyperliquid has encountered recently, exploring their impact on the platform's TVL, business data, and the price of the governance token HYPE, and looking forward to its investment value.
 
## JELLYJELLY Hunting: A Carefully Planned "Liquidity Trap"
Last Wednesday, March 26, Hyperliquid was the subject of an orchestrated market manipulation surrounding the JELLYJELLY token.

First, the attacker opened a JELLY short order worth $4.08 million on Hyperliquid with a margin of 3.5 million USDC. This unilateral position accounted for 9% of the liquidity of the entire network. Next, the attacker coordinated with the spot market to sell off to create the illusion of falling prices, inducing the Hyperliquid Protocol Treasury (HLP) to take over the position. The whale then pushed up the price through on-chain purchases, forcing its own position to be liquidated.
 ![](https://gimg2.gateimg.com/image/article/17436762381.jpeg)
Source: Hyperliquid
 
Later, when two well-known exchanges announced the launch of JELLY perpetual contracts, Hyperliquid's on-chain liquidity was instantly siphoned. The price of JELLY soared from $0.034 to $0.051 in half an hour, while the liquidation price of the short positions held by the HLP vault was as high as $0.141. This cross-platform collaborative operation reminds me of the confrontation between WSB retail investors and institutions in the GameStop incident in 2021, except that the battlefield has moved to the chain this time.

Hyperliquid's emergency response can be described as a "centralized wire-pulling" self-rescue. After the validators voted to remove the JELLY contract, the platform forced liquidation of 392 million short orders at the opening price of $0.0095, not only recovering all losses, but also making a profit of $703,000. However, this decentralized protocol relies on centralized operations to play a black humor.
 ![](https://gimg2.gateimg.com/image/article/17436762542.jpeg)
Source: @HyperliquidX
 
The incident had a significant impact on the price of HYPE tokens. According to Gate.io data, HYPE fell from $16 to $13 at the time, and later rebounded to $14 after Hyperliquid removed JELLY. As of the date of writing, the price of the coin is $12.5.
 ![](https://gimg2.gateimg.com/image/article/17436762733.jpeg)
Source: Gate.io
 
## 50x Leverage Whale Vulnerability Attack
Long before the JELLY incident, Hyperliquid's liquidation mechanism had exposed fatal flaws. On March 12, a whale extracted floating profits and artificially created a liquidation risk, causing HLP to lose more than $4 million in a single day.

The trader, known as "Insider" by the community, first opened a long position of 113,000 ETH with 50x leverage, an initial margin of $4.3 million, and a total value of about $340 million, and then withdrew the USDC over the margin while the position was open. As the price of ETH rose, "Insider" withdrew unrealized profits, reduced margin, triggered liquidation, and ultimately made a profit of about $1.8 million, while the HLP vault lost $4 million.
![](https://gimg2.gateimg.com/image/article/17436762964.jpeg)
Source: @Penny
 
The reason why this operation works is that Hyperliquid allows the withdrawal of floating profits. Unlike CEX, which prohibits the withdrawal of floating profits, HLP's "automatic liquidation + vault takeover" model is like running naked when encountering large positions. After the "insider" withdrew $8 million and $9 million in two batches, the liquidation price of its ETH long orders soared from $1,877 to $1,915, and HLP was forced to take on the selling pressure of 140,000 ETH at the market price.

What is even more shocking is that the whale changed the name of the DeBank account to MELANIA on March 18 and opened a position in the corresponding token. Although on-chain data analyst Yu Jin and on-chain detective ZachXBT accused him of using stolen money for trading, the truth remains a mystery.
 ![](https://gimg2.gateimg.com/image/article/17436763145.jpeg)
Source: @zachxbt
 
To prevent similar incidents, Hyperliquid subsequently adjusted the leverage limit, reducing BTC from 50x to 40x, ETH from 50x to 25x, and upgraded the margin system, requiring isolated positions to maintain a 20% margin rate after transfer to prevent liquidation from being triggered by withdrawal operations. However, this patching method only compensated for the unilateral withdrawal of floating profits from heavy positions to a certain extent, but did not expect JELLY's bilateral arbitrage behavior of opening short positions and pulling long positions.
 
## After Suffering A Heavy Blow, Can HYPE Recover From the Collapse of Trust?
After suffering a series of attacks, Hyperliquid's business data has shrunk significantly. As of April 3, 2025, TVL has fallen to $200 million, down about 71% from the peak of $690 million in January this year, and annualized revenue has also fallen to $436 million, reflecting market concerns about platform governance and transparency.
 ![](https://gimg2.gateimg.com/image/article/17436763366.jpeg)
Source: Dune
 
The result of this capital flight seems to be inevitable, because the attacker used a loophole in the rules to conduct large-scale arbitrage. Without human intervention, Hyperliquid's HLP will undoubtedly be emptied, the protocol will be unsustainable, and users will naturally leave. When the validator is able to remove the token through an emergency vote, the "decentralization" promise is dead in name only, and users who are disappointed with this governance failure will naturally choose to withdraw their funds and leave.

Regarding the price of HYPE tokens, the price of HYPE fell from the high of $16 in March to $12.5, and FDV evaporated about $6 billion. Technically, if it falls below the key support of $11-12, it may test the issue price of $8. However, the author believes that the current PS (price-to-earnings ratio) of 27 times has returned to the traditional industry valuation area, and the room for decline is relatively limited.
 ![](https://gimg2.gateimg.com/image/article/17436763567.jpeg)
Source: @HyperliquidX
 
In the long run, the economic model upgrade of Hyperliquid L1 may become the key to breaking the deadlock. The newly introduced WHYPE cross-chain staking solution on its HyperEVM mainnet allows users to convert native HYPE into packaged assets to participate in other DeFi protocols. This essentially creates a second pricing curve with the power of the <a href="/ja/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> ecosystem. If the route goes smoothly, HYPE's value capture will transition from a simple liquidation profit share to a "cross-chain liquidity gateway." In my opinion, this uncashed forward check is the underlying logic for some investors to increase their positions against the trend.

As a bystander observing the development of DeFi, I believe that Hyperliquid's challenges are not isolated, but a necessary stage in the growth of DeFi. In the long run, if Hyperliquid can take this opportunity to optimize its governance mechanism and improve transparency, its leading position in the perpetual contract trading field will still have a chance to be consolidated. Especially for investors with a high risk appetite and optimistic about the long-term development of DeFi, HYPE may be an option worthy of continued attention.



<div class="blog-details-info">
<div>Author:**Charle Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions. All investments carry inherent risks; prudent decision-making is essential.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>


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After Being Hunted Down One After Another, Is Hyperliquid (HYPE) Still Worth Investing In?