Original source: BitMEX
Quick Facts
Markets have been volatile this week, driven by escalating trade tensions - aggressive tariffs and conflicting signals from the U.S. government have unsettled traders and investors
White House Cryptocurrency Summit Follow-up: The impact of the summit held on March 7, 2025 continued to ferment, and President Trump announced the establishment of a strategic reserve of Bitcoin. According to NBC News, the move did not initially impress investors, leading to market volatility early this week.
Hyperliquid suffered a $4 million loss: On March 12, 2025, the decentralized exchange Hyperliquid lost $4 million in its HLP fund pool due to a trader’s clever use of high leverage transactions and manipulation of the liquidation mechanism.
TIA, IP, and PEPE performed well, with increases of 15.7%, 13.5%, and 1.5%, respectively; while GRASS, RAY, and AAVE performed poorly, with declines ranging from -35.3% to -21.0%.
In the trading analysis session, we will take a deep dive into the once-popular token $HYPE - is now a good time to buy the dip?
Data Overview
Best Performer
$TIA (+15.7%): Celestia’s notable rise stems from short covering
$IP (+13.5%): Story Protocol saw significant growth due to its innovative approach to IP and increased community engagement
$PEPE (+1.5%): Pepecoin’s modest gains could be an early sign of the meme coin’s continued popularity
Worst performance
$GRASS (-35.3%): Grass experienced a sharp decline due to ongoing challenges facing the project and the broader market correction.
$RAY (-26.4%): Raydium’s decline was primarily due to intense competition within the Solana ecosystem and a decline in memecoin trading volumes.
$AAVE (-21.0%): AAVE has performed well over the past few weeks and this drop can be seen as a healthy correction
News
Macro Environment
ETH ETF weekly net outflow: -$143 million ( source )
BTC ETF weekly net outflow: -$862.2 million ( source )
First White House cryptocurrency summit disappoints some investors ( source )
Russia’s Ministry of Finance says it wants to control unregulated cryptocurrency activity through state infrastructure ( source )
Cryptocurrency leaders attend Trump summit, strategic reserves become the focus ( source )
Argentina requests Interpol red notice for LIBRA co-founder Hayden Davis ( source )
Project News
Hyperliquid lost $4 million in a single liquidation ( source )
Ripple receives DFSA license to provide crypto payment services in the UAE ( source )
Solana’s SIMD-228 proposal, which aims to reduce SOL inflation by 80%, did not meet the passing threshold ( source )
Aave launches EURC stablecoin on Base, which can be used as lending collateral ( source )
PI rose 13% on Pi Day, can the rise continue? ( Source )
Ledger says Trezor Safe devices are still vulnerable to physical supply chain attacks ( source )
Lazarus Group Transfers 400 ETH to Tornado Cash to Expand Malware Attacks (Source )
Transaction Analysis
Note: The following does not constitute investment advice. This is a compilation of market news and we always recommend that you conduct independent research before executing any trades. The following does not guarantee any returns and BitMEX is not responsible for your trading performance.
$HYPE Deep Pullback: Analysis of Recent Plunge
Hyperliquid’s recent turmoil highlights the delicate balance that decentralized exchanges need to maintain between innovation and risk management. The platform’s pursuit of advanced features such as high leverage, low spreads, and fast coin listings has attracted a wide user base, but it has also exposed major vulnerabilities. The incident in which a whale used a highly leveraged Ethereum position to cause a loss of $4 million in the community-supported HLP fund pool highlights the potential risks of excessive pursuit of rapid innovation while ignoring robust security measures.
Event Review
A trader with a wallet address of 0x f 3 f 4 opened a 50x leveraged long position of 175,000 ETH, equivalent to approximately $340 million. By strategically withdrawing collateral, the trader induced the liquidation of the remaining 160,000 ETH position, causing Hyperliquids HLP pool to lose $4 million and making a profit of $1.8 million.
Market reaction
Affected by this incident, Hyperliquids native token HYPE fell 8.5%, from $14.04 to $12.84, and then stabilized at a low of $13.
Loss Mechanism Analysis
Execution Slippage
Liquidation engine limitations: The platform’s liquidation mechanism has difficulty handling the closing of such large positions, resulting in severe execution slippage
Market inefficiencies: This incident exposed the challenges of decentralized systems in processing large and fast transactions, especially in terms of liquidity constraints and execution speed.
Risk Management Limitations
Inadequate protection: HLP pools lack adequate protection for large leveraged positions, allowing manipulation through strategic profit extraction
Community ownership risk: Due to the community ownership structure, depositors bear losses directly, which may damage trust and affect future liquidity supply
Wider Implications for DeFi
Platform stability: Huge losses reduce the funds and liquidity of the fund pool, weaken the platforms ability to provide high-leverage transactions, and affect the overall market depth
Regulatory and community scrutiny: This incident has heightened the discussion on risk management and potential market manipulation in decentralized protocols
Long-term viability: Despite previous profitability, events like this may force Hyperliquid to reassess its risk model and core strategies to ensure sustainable operations
Hyperliquid’s response
In response to this incident, Hyperliquid has implemented a number of changes:
Reduced maximum leverage: The platform has reduced the maximum leverage of Bitcoin to 40x and Ethereum to 25x to reduce the risks associated with large positions
Increased margin requirements: Large positions are now required to provide higher margins to prevent similar liquidation chain reactions
Further risk control updates: Planned enhancements include dynamic risk limits and improved position monitoring to strengthen the overall security of the platform
While these measures are intended to strengthen risk management, their effectiveness depends on addressing the core vulnerabilities exposed by this incident.
Trading Perspective: Is HYPE Overvalued?
According to the latest data, HYPE is currently trading at around $13.30, with a circulating supply of 333,928,180 tokens and a market cap of around $4.44 billion. Considering the total supply of 1 billion tokens, the fully diluted valuation (FDV) is around $13.3 billion.
Considering recent events and the inherent risks of highly leveraged trading platforms, there are growing concerns that HYPE may be overvalued at its current FDV. Investors should be cautious before making investment decisions and consider the platforms risk management capabilities and overall market conditions.
in conclusion
Hyperliquid’s recent challenges highlight the critical importance of decentralized exchanges maintaining a balance between innovative products and robust risk management. While the platform’s advanced features have driven growth, this incident highlights the consequences of insufficient security measures. Investors and users alike need to remain vigilant and assess the opportunities and risks inherent in such fast-growing platforms.
