On March 26, 2025, Hyperliquid, one of the most successful non-KYC crypto exchanges, faced an unprecedented crisis. Its HLP vault came under severe pressure, leading to a high-risk liquidation that threatened millions in user funds. But was it an accident, a vulnerability, or something more sinister? I had to dive into the details of what might be one of the most aggressive DeFi attacks this year.

I first noticed something was off when a trader opened a short position on Jelly, a low-market-cap token. Initially, nothing unusual—until a whale began aggressively selling Jelly, pushing its price lower. Then, out of nowhere, the price exploded—doubling, tripling, and even quadrupling in minutes. This rapid movement liquidated the trader’s position almost instantly. But the real problem? The HLP vault inherited the position.

Why Did This Happen?

• The HLP is designed to absorb riskier positions when traders get liquidated.

• The low liquidity of Jelly meant the position couldn’t be closed fast enough.

• The leveraged model of HLP magnified losses—Hyperliquid was suddenly on the hook for $11 million in unrealized losses.

Who’s Behind This? A Coordinated Attack?

Blockchain detective ZachXBT started tracking the wallets involved. I noticed something suspicious—funds used in the attack came from Binance and were moved through various chains, suggesting a well-planned, coordinated effort.

And then, the real twist: Binance and OKX rushed to list Jelly on their futures market. Coincidence? Maybe. But I, like many others in the crypto space, believe that competitors saw an opportunity to crush Hyperliquid and took it.

Hyperliquid’s Controversial Response: Centralization or Smart Decision?

With no time to waste, Hyperliquid’s governance took action:

• Trading for Jelly was frozen.

• The toxic short position was manually closed at an earlier price.

• The trader who initiated the short absorbed the loss, protecting user funds.

This move saved the protocol from a catastrophic collapse. But it also raised a huge question: Is Hyperliquid too centralized?

Some argued that this decision showed strong governance and protected users. Others saw it as a centralized intervention that sets a dangerous precedent.

What’s Next for Hyperliquid?

Despite the crisis, I see that Hyperliquid isn’t backing down. They’re already implementing:

• Better risk management to prevent similar attacks.

• Stronger liquidity safeguards for low-market-cap tokens.

• A push for more decentralization—but at the right pace.

Hyperliquid is still young, and like Bitcoin or Solana in their early days, it’s facing growing pains. Will it emerge stronger, or will this attack leave permanent damage? Time will tell.

One thing is clear: Crypto exchanges are not your friends. Binance, OKX, and others will always protect their interests first. Hyperliquid’s growth is a threat to them, and this event proved they’ll do whatever it takes to maintain dominance.

Final Thoughts: Should You Still Trust Hyperliquid?

Despite the chaos, I remain bullish on Hyperliquid. This attack exposed weaknesses, but also proved the team’s ability to react and protect users.

If you believe in the future of truly decentralized, high-performance trading, now is the time to pay attention.

Sign up for Hyperliquid here and see for yourself where this ecosystem is heading.

What do you think—was Hyperliquid’s response justified, or does this raise red flags for decentralization? Let’s discuss!