The recent liquidation of a long trade exceeding $200 million on ether (ETH) has highlighted the risks associated with high-leverage trading. This incident resulted in a staggering $4 million loss for Hyperliquid, as a prominent trader, referred to as a ‘whale,’ executed a leveraged position that ultimately faltered.
Specifically, the wallet identified as ‘0xf3f4’ opened an intricate 50x long ETH position, depositing $4.3 million USDC as margin to facilitate a total trade size of 113,000 ETH. However, following this aggressive move, the account began withdrawing funds, which unexpectedly lowered its margin below the required maintenance levels. The aftermath? An impressive $1.8 million profit for the user, but a significant $4 million loss for the Hyperliquid Provider (HLP) vault.
Hyperliquid’s HLP vault serves as a blockchain-based product allowing users to deposit USDC for the opportunity to earn a share of the profits generated by various trading strategies. The incident stirred speculation among users of a potential exploit within the Hyperliquid platform—a notion that Hyperliquid was quick to refute in a post on X.
“There was no protocol exploit or hack,” stated Hyperliquid. “This user had unrealized PNL, withdrew, which lowered their margin, and was liquidated. They ended with ~$1.8M in PNL. HLP lost ~$4M over the past 24h. HLP’s all-time PNL remains at ~$60M. As a reminder, HLP is not a risk-free strategy.”
In response to this incident, Hyperliquid has announced plans to update the maximum leverage for trading Bitcoin (BTC) and ETH to 40x and 25x, respectively, thereby increasing the maintenance margin requirements for larger positions in an effort to prevent similar occurrences in the future.
Despite the short-term impacts of this liquidation, it is noteworthy that Hyperliquid’s HLP vault has maintained an impressive all-time profit margin of $60 million. Meanwhile, the platform’s HYPE token experienced a brief dip from $14 to under $13 in reaction to the liquidation but has since recovered, returning to its previous levels by late Asian hours.
This incident serves as a crucial reminder of the inherent risks of high-leverage trading and emphasizes the importance of understanding margin requirements in the world of crypto trading.
