A calculated market manipulation involving $JELLY was at the edge of putting Hyperliquid’s liquidity vault at risk of losing millions.
A whale’s scheme to short and pump the token triggered a cascade of liquidations, prompting Binance to list $JELLY—intensifying an apparent DeFi-CEX showdown.
Background
- Hyperliquid, a rising decentralized perpetual exchange, faced mounting pressure after a sophisticated scheme involving the token $JELLY caused a massive short squeeze.
- A trader opened a $6 million short position on the relatively illiquid $JELLY token, only to later manipulate the token’s price by aggressively buying it on the spot market—effectively liquidating their own position.
- That liquidation transferred the toxic short to Hyperliquid’s Hyperliquidity Provider (HLP) vault, a mechanism designed to absorb liquidated positions and maintain platform stability.
- With $JELLY’s price skyrocketing over 400% in just an hour, the vault accumulated over $10 million in unrealized losses.
- However, latest report from WuBlockhain revealed that the Hyperliquid Vault finally settled the $JELLY position making a profit of $703,000.
Why Should You Pay Attention?
- This incident exposes vulnerabilities in decentralized trading platforms where on-chain manipulation can force systemic losses.
- The attack also hints at potential risks for investors in smaller-cap tokens and raises serious questions about protocol resilience in high-volatility environments.
- Adding fuel to the fire, Binance announced the listing of $JELLY perpetual contracts (JELLYUSDT) just hours after the incident, interpreted by some as an opportunistic move—or even a calculated jab—at Hyperliquid.
Who Said What?
- WuBlockchain flagged the 429% spike in $JELLY within an hour, describing the timeline of events. However, WuBlockhain later made an update:
- Lookonchain traced the manipulation to a whale wallet holding 124.6M $JELLY ($4.85M), identifying coordinated dumping and rebuying behavior.
- Abhi, founder of AP Collective, called Binance’s JELLYUSDT listing a declaration of war:
“Binance will offer perps listing for $JELLY. They’ve declared war against Hyperliquid.”
- Hedgedhog commented:
“Everything that happened today (except for closing the position) is just game theory,” defending transparency in on-chain strategies.”
- Giving an update on the matter, HyperLiquid posted on its X account:
“All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data. There is no need to open a ticket. Methodology will be shared in detail in a later announcement. “
- Meanwhile, discussions have mounted from the community with a user challenging the HyperLiquid platform noting:
"if hyperliquid proves that there was a fair vote (they should rly bring this on-chain and allow for emergency votes so everyone can verify) to protect the platform and their users from an attack, they should do it."
Zooming Out
- Hyperliquid’s drama with $JELLY appears to be more than just a token blowup but also a pivotal moment in DeFi vs. CEX dynamics.
- Hyperliquid, despite its rising traction and volume, remains vulnerable to orchestrated on-chain attacks due to its decentralized structure and low-liquidity token listings.
- The incident draws parallels to broader concerns in DeFi around manipulation and protocol robustness.
- It also reflects the strategic opportunism of major players like Binance, which swiftly listed $JELLY following Hyperliquid’s turmoil.
- Whether this will erode trust in Hyperliquid’s infrastructure—or boost its community resolve—remains to be seen.
- At the time of writing, $JELLY trades at $0.02418 still managing an uptick of over 80% in the past day.
