TLDR
- Hyperliquid’s XPL pre-launch saw a 2.5x spike, triggering liquidations and auto-deleveraging.
-
New safeguards include a 10x hard cap on mark prices and external market data integration.
-
The platform confirmed no technical failures but highlighted the risks of pre-launch markets.
-
Hyperliquid’s native cryptocurrency, HYPE, hit a new all-time high following the updates.
In a recent incident that highlighted the risks of trading in pre-launch markets, Hyperliquid’s XPL token saw a sudden and dramatic price spike. Whale-driven activity caused the price of XPL to soar 2.5x in minutes, triggering widespread liquidations. These liquidations led to the auto-deleveraging of traders’ positions, wiping out over $17 million in value, mostly affecting those in short positions. The rapid price movement has led Hyperliquid to implement new safeguards aimed at mitigating similar risks in the future.
Despite the chaotic price surge, Hyperliquid’s team assured users that there were no technical failures or bad debt involved in the incident. The platform clarified that the blockchain and liquidation systems functioned as designed, first executing liquidations via the order book before switching to auto-deleveraging due to insufficient margin. This mechanism helps ensure that the platform remains solvent and that no bad debt is incurred.
What Triggered the Hyperliquid Price Surge?
The sudden 2.5x spike in the price of XPL was primarily driven by whale activity. Analysts identified that four whale addresses participated in short-squeezing XPL, collectively making over $46 million in profits. This type of activity is not uncommon in markets with low liquidity, especially in pre-launch periods where volatility is heightened.
According to CoinGlass data, the price of XPL briefly reached nearly $1.80 before correcting, while the same token traded on Binance peaked at only $0.55.
Hyperliquid’s handling of the incident, while within the rules of the platform, has sparked some criticism. Some users have called for more intervention from the platform, citing the risks posed by such market anomalies. However, the platform emphasized that the pre-launch market was clearly labeled with warnings about low liquidity and high volatility, urging traders to exercise caution.
New Safeguards to Prevent Future Issues
In response to the incident, Hyperliquid has outlined two key updates designed to improve the platform’s safeguards and volatility protection mechanisms. The first measure involves a hard cap on the mark price for the XPL token, limiting it to 10x the 8-hour exponential moving average. This cap is intended to provide clearer risk boundaries for traders and encourage liquidity provision during volatile periods.
The second measure will involve integrating external perpetual market data into the mark price formula for hyperps (Hyperliquid perpetual markets).
This will help ensure that price signals are more robust, especially in thin markets, by including data from other pre-launch venues, like Binance’s XPL market. While this update won’t change realized profits and losses or the platform’s funding mechanisms, it will make the pricing process more transparent and less susceptible to manipulation.
