Latest news with #JELLY
Yahoo
6 days ago
- Business
- Yahoo
HyperLiquid's Market Making Vault Grows by $250M in 2 Months Despite JELLY Fiasco
The yield-bearing vault created by decentralized exchange HyperLiquid has grown from $163 million to $418 million over the past two months despite centralization concerns around the JELLY market fiasco in March, data from DefiLlama shows. The vault, which acts as an internal market maker and gives depositors a yield, was underwater by $13.5 million after a user manipulated the index price of JELLY in March. HyperLiquid minimized these losses by forcibly closing the JELLY market, settling it at $0.0095 as opposed to $0.50 that was being fed to oracles via decentralized exchanges. This led to an exodus of capital from the HyperLiquid platform, total value locked (TVL) dropped from $510 million to $150 million while the HYPE token suffered a 20% downturn. But all was soon forgotten in part due to the emergence of James Wynn, a derivatives trader that made and lost $100 million on HyperLiquid in a week. His public trades and commentary generated a wealth of bullish sentiment around HyperLiquid as the platform managed to handle the nine-figure positions in terms of liquidity and slippage. Over that period, TVL increased along with HYPE, which is now up by 72% in the pat 30-days. The HyperLiquid vault is currently returning 13.42% in annual interest, beating various restaking protocols that offer around 9.1%.
Yahoo
12-04-2025
- Business
- Yahoo
How the Hype for HyperLiquid's Vault Evaporated on Concerns Over Centralization
Just two months ago, the total value of funds locked (TVL) on HyperLiquid, a decentralized derivatives exchange (DEX) that allows traders to generate returns by staking to a shared vault, sat at a record $540 million. Now, users are fleeing, TVL has slumped to $150 million and the yield has dropped to a measly 1%, in many cases, less than they'd get if they stashed their cash in a bank account. At issue is an exploit that saw one user manipulate the price of a token called JELLY and force the vault, known as Hyperliquidity Provider, into a loss. But the negative PNL wasn't the reason for the exodus. Rather it was HyperLiquid's response, which led to concerns about how decentralized the protocol actually was, and whether it was acting exactly like the centralized exchange model it tried to distance itself from. For the manipulation, the user shorted JELLY on HyperLiquid, that is sold tokens they didn't own. They also bought tokens on illiquid decentralized exchanges. The lack of liquidity tricked the pricing oracle to relay an inflated price to HyperLiquid, forcing HyperLiquid's vault to inherit a toxic position via liquidation. As the price of JELLY rose further because of the spot buying pressure, the PNL for HyperLiquid's vault sank more heavily into the red. Eventually, the exchange force closed the JELLY market, settling it at $0.0095 as opposed to the $0.50 that was being fed to oracles via decentralized exchanges. This meant that the negative PNL was wiped away and, on paper, the vault performed well throughout the saga. But the action raised concerns about the control of what's meant to be a decentralized process. At the time, Newfound Research CEO Corey Hoffstein questioned the legality of HyperLiquid's actions and social media descended into outrage. Some believe that the exploit was a mistake on HyperLiquid's part. 'The Jelly exploit on Hyperliquid wasn't a fluke," Jan Philipp Fritsche, managing director at Oak Security, told CoinDesk. "It was a textbook case of unpriced vega risk: when leveraged trading on volatile assets is allowed without properly accounting for how that volatility can drain the risk fund. The attacker opened massive opposing positions in JELLY, knowing that one side would collapse and the other would cash out. "This isn't theoretical. It happened. And it will happen again. We flagged this exact risk vector in audits before, but economic flaws often get ignored because they're not technical. That's a mistake," Fritsche added. In this case, the manipulator ended up with a small loss. It's worth pointing out that HyperLiquid attempted to remedy the centralization concerns, upgrading its system to a include an on-chain validator voting for asset delisting, which means that the exchange will not be able to remove like JELLY in future without validator consensus. While the vault suffered a major blow in terms of trust and branding, the exchange itself continues to tick along just fine in terms of trading volume. Over $70 billion worth of volume has been notched so far this month and it looks to be on track to break it's January record of $197 billion. Still, the exchange's native token (HYPE), which was distributed to users in December, has failed to mimic the positive performance of the exchange, losing 60% of its value over the past four months with its market cap dwindling from $9.7 billion to $4.6 billion. Sign in to access your portfolio
Yahoo
07-04-2025
- Business
- Yahoo
Decentralized Exchange Hyperliquid Loses $6.2 Million in Exploit, Yet Continues To Challenge Centralized Rivals
Decentralized exchanges (DEXs) continue to challenge centralized exchanges (CEXs), even as a $6.2 million exploit on the Hyperliquid platform raises concerns about the security of these platforms. The incident involved a cryptocurrency whale making a substantial profit after manipulating Hyperliquid's liquidation parameters. The whale took advantage of the volatility of the Jelly my Jelly (JELLY) meme coin, making at least $6.26 million when the token's price increased by 400%. Despite this exploit, Hyperliquid's growth in trading volume is notable, with the platform ranking as the eighth-largest perpetual futures exchange by volume, surpassing traditional exchanges like Kraken, HTX, and BitMEX. The exploit, which was the second major attack on Hyperliquid in March, highlighted vulnerabilities in the platform's infrastructure. The whale's exploit involved taking out two long positions worth $2.15 million and $1.9 million, as well as a $4.1 million short position that was meant to offset the longs. When the price of JELLY surged, the short position was not immediately liquidated due to its size. Instead, it was absorbed into Hyperliquid's HLP Vault, which is designed to handle large positions. Despite the exploit, as of March 27, the whale still held about 10% of the JELLY token supply, worth nearly $2 million. While Hyperliquid continues to grow, analysts like Ryan Lee from Bitget Research warn that the way the platform handled the exploit may damage confidence in decentralized exchanges. Lee noted that Hyperliquid's intervention in freezing and delisting the JELLY token appeared too centralized for a platform that claims to be decentralized, which could make investors wary of future exploits on similar platforms. This exploit follows another incident in March when a token inspired by The Wolf of Wall Street lost over 99% of its value after revealing that 80% of its supply was held by insiders. Despite these setbacks, the overall rise in trading volume and growing competition from DEXs signal a shift in the market. As decentralized platforms continue to gain momentum, their challenge to centralized exchanges is likely to intensify, with both sides gearing up for a more competitive future. Sign in to access your portfolio
Forbes
01-04-2025
- Business
- Forbes
DeFi Not So Decentralized: Hot Take From The Hyperliquid Scandal
Human hands with strings manipulating diagram. The accurate level of decentralization in Web3 has been under much scrutiny. After all, it promised an alternative system without a single point of failure. As we learnt through the years, metrics such as the Nakamoto coefficient tell us the degree of network decentralization. At the same time, people associate DeFi with a range of financial products showcasing the same promise of decentralization. And yet, in most cases, DeFi relates to financial applications running on the blockchain, with various degrees of internal control for security measures within the product itself. As DAI is considered the most decentralized stablecoin, USDC is highly centralized. The question is: Is centralization always bad? This conversation resurfaced after Hyperliquid faced a liquidity crisis. Solana-based memecoin JELLY pumped nearly 500%, triggered by a high-stakes exploit—not of vulnerabilities but of the platform's own mechanisms. The situation escalated rapidly, placing more than $230 million in protocol funds at risk. This event reignited the decentralization debate. Here's why… Let's explore what happened. A trader opened a $6 million short position using 20x leverage; rather than waiting for the market to move organically, they executed a series of spot market buys that caused JELLY's price to spike. This rapid pump triggered the liquidation of their own short 'intentionally' to offload the risk directly onto the protocol. An audacious tactic. With no external liquidators willing to absorb the exposure, Hyperliquid's own vault was forced to inherit the short position due to triggering the protocol's built-in fallback mechanism. At the height of the chaos, data surfaced showing Hyperliquid's vault holding a staggering 388 million JELLY short—amounting to over $10 million in unrealised losses–that left the DeFi community asking not just how it happened but what comes next. Another observer, @printer_brrr, described it in a single, now-viral meme: 'Short on perp. Pump the *coin on spot. Perp gets liquidated.' Beneath the humor lay a precise summary of calculated sequences—one that weaponised market mechanics and forced a decentralized platform to absorb the weight of a highly toxic position. As the JELLY price continued its meteoric climb, losses within the vault soared past $12 million; had the rally persisted, the platform could have lost its entire $230M reserve. Faced with a full vault wipeout, Hypererliquid initiated an emergency response. The platform force-liquidated 392 million JELLY at the price of $0.0095, well below market value at the time. While extreme, the move ultimately worked in Hyperliquids' favour; the protocol actually made a profit of $703,000. To prevent further exposure, Hyperliquid delisted JELLY, flipping what could have been a platform-threatening liquidation into a controlled act of damage limitation. Talk about sparking controversy in the community. Although the platform survived intact, the episode made one thing clear: centralization can quietly resurface in a time of survival. Decentralized finance encompasses a wide range of protocols: exchanges, lending, perps, stablecoins. And while misleading people about the protocol's decentralization capabilities is wrong, centralization can be helpful if we think within the broader spectrum of blockchain-based finance. Onchain finance, for example, does not rely on the promise of decentralization. It usually refers to processes that include centralized counterparties. Take tokenization, for example, where custodians, brokers, and admins are not decentralized. And yet, the financial sector can still benefit from blockchain. It's high time to start differentiating between what fully decentralized platforms can do and what kind of risks they may pose. After all, entities such as Circle being able to freeze their stablecoins in the face of an exploit serves a security function. On the other hand, if people trust the protocol and use it with its supposed decentralization in mind, it is no surprise that some traders are unhappy with how Hyperliquid solved this problem. In the end, the Hyperliquid scandal opened a Pandora's box of discussions about how many DeFi platforms will operate in a decentralized setting until an exploit happens. The clue to this should be that there is nothing wrong with having centralized elements of business, as long as projects don't present themselves as fully decentralized. Managing expectations of users is the key here, but as always–we need to do our own research.
Yahoo
28-03-2025
- Business
- Yahoo
Hyperliquid Whale Retains 10% of JELLY Meme Coin After $6.2 Million Exploit and Exchange Delisting
A crypto whale who manipulated the price of Jelly my Jelly (JELLY) on the decentralized exchange Hyperliquid still holds around 10% of the token's total supply, valued at nearly $2 million. Despite Hyperliquid freezing and delisting JELLY due to suspicious trading activity, five addresses linked to the entity continue to hold significant amounts of the token, according to blockchain investigator ZachXBT. The whale reportedly exploited Hyperliquid's liquidation mechanism, making at least $6.26 million in profit. The manipulation took place when the trader opened three large positions within five minutes: two long positions worth $2.15 million and $1.9 million and a $4.1 million short position. When JELLY's price surged by 400%, the short position should have been liquidated, but its size prevented an immediate sell-off. Instead, it was absorbed by the Hyperliquidity Provider Vault (HLP), a system designed to liquidate large positions in a controlled manner. This allowed the entity to escape the liquidation process while profiting from the price increase. Hyperliquid later froze trading and delisted JELLY, citing "evidence of suspicious market activity." The Hyperliquid has announced it would reimburse most affected users, excluding the exploiter. Users with JELLY long positions at the time of settlement will be refunded as if their trades closed at $0.037555. Hyperliquid acknowledged weaknesses in its liquidation system and announced changes, including stricter caps on the Liquidator vault, adjustments to the open interest cap formula, and an on-chain voting system for delisting assets that fall below certain thresholds. The JELLY collapse is the latest in a string of meme coin-related scandals. Just two weeks earlier, a Wolf of Wall Street-themed meme coin launched by Hayden Davis, co-creator of the MELANIA and LIBRA tokens, crashed by over 99% after it was revealed that insiders controlled 80% of the supply. These incidents have intensified concerns about meme coins, which often gain traction based on hype rather than real utility. Alvin Kan, chief operating officer at Bitget Wallet, noted that such projects remain vulnerable. 'Hype without fundamentals doesn't last,' he said, adding that speculative tokens will continue to be exposed in fast-moving markets. The incident has also raised questions about the balance between decentralization and intervention. While Hyperliquid's decision to freeze JELLY trading and delist the token protected users from further losses, it has sparked debate over the level of centralized control in decentralized finance. The platform responded by stating that it remains committed to improving its financial infrastructure, acknowledging that it is "not perfect" but will continue to "iterate and grow" with the help of its community. Sign in to access your portfolio
