Hyperliquid to Compensate JELLYJELLY Traders and Strengthen Risk Protocols

Hyperliquid, the leading decentralized perpetual exchange (DEX) by volume per DeFiLlama, has announced that it will compensate liquidated JELLYJELLY traders and make changes to its risk management strategies.

HYPE is down by 5.8% in the past 24 hours, according to Coingecko data.

The move comes in response to a March 26 vault attack, which resulted in Hyperliquid’s HLP vault briefly incurring losses worth $10 million. The team controversially settled the position at a profit after delisting the JELLYJELLY token. However, this led traders who went long on the token to incur losses as their positions were forcibly closed.

“Users with JELLY long positions at the time of settlement will be refunded by the Foundation as if their position settled at the closing price of 0.037555. This results in all JELLY traders being settled at a price advantageous to them, except flagged addresses,” Hyperliquid said.

Furthermore, the protocol said it would strengthen its risk management strategies to prevent further attacks. The Liquidator vault will now have a tight cap representing a small percentage of the total HLP account value. It will also be rebalanced less frequently, and backstop liquidations will be optimized.

Moving forward, automatic deleveraging (ADL) will activate if the liquidator falls below a certain threshold. Previously, ADL moved collateral automatically from other vaults.

Additionally, open interest (OI) caps will be adjusted to become dynamic relative to market cap, while validators will begin voting onchain to delist assets that fall below certain thresholds.