Whale’s Nine Figure ETH Liquidation Costs Hyperliquid $4 Million

Hyperliquid, a decentralized perpetuals exchange that operates on its own Layer 1 blockchain, incurred a $4 million loss on Wednesday after a wealthy trader’s $200 million leveraged long position on Ether (ETH) was liquidated.

The so-called whale profited around $1.7 million after liquidation. According to reports, the trade was initially opened earlier in the day when ETH was trading at around $1,890 and Bitcoin (BTC) was trading at around $82,400.

The liquidation involved wallet ‘0xf3f4’ opening a highly leveraged 50x long position on ETH, using a $4.3 million USDC margin to build a total position of 113,000 ETH, and then withdrawing some of the collateral. In a post on X, Hyperliquid clarified that this was not a hack or a breach.

“This user had unrealized [profit and losses], withdrew, which lowered their margin, and was liquidated,” Hyperliquid confirmed. “They ended with ~$1.8M in PNL. HLP lost ~$4M over the past 24h.”

The platform noted that its HLP vault, which acts as an automated market maker and takes the other side of traders’ positions, remains well capitalized, with all-time profit remaining at around $60 million. “As a reminder, HLP is not a risk-free strategy,” it added.

Market Implications

The abrupt liquidation of such a large trade raised concerns about liquidity depth and whether DEXs can manage large-scale liquidations without incurring significant losses.

“Due to the excessively large liquidation size, Hyperliquid HLP took over the position at $1,915 and is gradually unwinding it, currently facing a floating loss exceeding $4 million,” Kasper Vandeloock, a crypto trader and adviser, told DL News.

Hyperliquid said that as a result, the maximum permitted leverage will be updated for BTC and ETH to 40x and 25x, respectively. This move aims to “increase maintenance margin requirements for larger positions” and “provide a better buffer for backstop liquidations of larger positions.”

Meanwhile, Hyperliquid’s token has decreased by 4% in the past 24 hours and is currently trading at $13.36. HYPE has been in a downtrend since peaking around Christmas.