Hyperliquid Sees $166 Million Outflow Due to Whale Liquidation Fallout… HYPE Drops 8%

# Whale Liquidation Shakes Hyperliquid, Leading to $4 Million Loss in HLP Vault Hyperliquid, a decentralized exchange (DEX), has experienced significant turmoil following a large-scale liquidation of an Ethereum (ETH) long position held by a whale investor. The incident led to a $4 million loss in the platform's HLP Vault and triggered a net outflow of $166 million within a single day. Additionally, the price of Hyperliquid's governance token, HYPE, plummeted by 8%, exacerbating market anxiety. # Whale Liquidation Results in $4 Million Loss for HLP Vault The crux of the issue lies in the liquidation of a $340 million (175,000 ETH) long position by a whale investor. The investor had leveraged the position heavily, withdrawing a $17.09 million margin, which caused the collateralization ratio to fall below the maintenance threshold, triggering liquidation. Hyperliquid acquired the liquidated position at an ETH price of $1,915, but the resulting market drop caused the HLP Vault to incur a $4 million loss. While some investors speculated that the incident was due to a "security vulnerability," Hyperliquid clarified that it was simply a result of "margin management failure." # $166 Million Net Outflow Shakes Investor Confidence Following the disclosure of the HLP Vault loss, investors withdrew large sums, leading to a net outflow of $166 million in a single day—the second-largest daily outflow in Hyperliquid's history. Ben Zhou, CEO of Bybit, commented, "This incident underscores the necessity for DEXs to implement CEX-level risk management systems while maintaining high leverage. Measures such as market surveillance systems and open interest (OI) limit settings are essential." # Leverage Limits Adjusted and HYPE Price Falls In response to the large-scale liquidation event, Hyperliquid has adjusted its leverage limits to mitigate further risk. The maximum leverage for Bitcoin (BTC) has been reduced from 50x to 40x, and for Ethereum (ETH) from 33x to 25x. This move aims to limit high-risk trading involving excessive leverage and reduce market shock from significant liquidation events. Meanwhile, Hyperliquid's governance token HYPE fell 8.5% immediately following the incident, dropping from $14.04 to $12.84, before slightly rebounding to $13.36. However, HYPE has seen a 44% decline over the past 30 days and a 24.3% drop over the past week, outpacing the market average decline. The impact on investor confidence remains significant, with future HYPE price trends and Hyperliquid's subsequent measures closely watched by the market.