A Blackhat Bitcoin Bet: The Collapse of Hyperliquid
Historical Context: A $1 billion investment in the decentralized exchange Hyperliquid saw a massive shift, with the investor’s account surviving a massive drawdown on paper. The bet on Bitcoin, which had been pegged to a $109,500 all-time high, eventually began to end when Bitcoin’s price retraced from that peak, losing $15.6 million in a volatility-driven market.
The Bet on Bitcoin: The user’s position was one of the largest leveraged, or 40x, trades on Hyperliquid. This bet anticipated that Bitcoin would continue rising, and as such, the user’s 40x long position peaked at a $108,000 entry price. Bitcoin’s price surged to a record high of $109,500 before dropping below this level, resulting in a $12 million drawdown on paper.
Market Volatility’s Impact: The trading day was marked by high volatility, with Bitcoin trading around $108,300, up by 1.5% over the past day. The liquidation price for this trade, which effectively closes the position prematurely, stood at $103,800. This meant the user’s loss equaled roughly $15.6 million, with the risk of their account being wiped out.
The Flashيار: The bet brought about a 17 million dollar gain on paper, but within two hours, Bitcoin’s price retraced its move from the new all-time high, resulting in a $15.6 million loss. By the end of the day, the hyper leveraged position had returned, with the user now held a roughly $59 million profit across their activity. This is one of the largest profits in the history of Hyperliquid.
Hyperliquid’s Security Concerns: While the user’s position ended with a massive loss, their accounts remained deployed for future trades. Hyperliquid leverages up to 40x, and rapid changes to ALAT networks invoking for hyper leveraged users can send their accounts to a "public spectrum," which may include security risks such as manual factoring or stake purchases. This highlights theOrange league of the decentralized exchange, where even skilled traders can face penalties.
A Big Trade: The routers associated with SigmaSquared explained the initial trade, stating it was inspired by a $400,000 bet by "0x507" on Hyperliquid a few days ago. The user then added to their position several times, indicating a series of back-and-forth trades that eroded their position over time.
The user’s Perspective: With the exchange.operatively under threat after losing $59 million, SigmaSquared and JamesWynnReal declined further comments, reinforcing the exchange’s security measures. They emphasized their expertise and the unpredictability of the crypto markets.
In conclusion, the investment in Hyperliquid, while a success, serves as a stark reminder of the risks and vulnerabilities inherent in hyper leveraged derivatives.
