Hyperliquid ditches JELLYJELLY, profits $700K as whale's gambit backfires

Key Takeaways

• Hyperliquid narrowly avoided a $12 million loss in what appears to be a Jelly-My-Jelly token manipulation scheme.
• Concerns have been raised about Hyperliquid's liquidation mechanism and associated risks.

Hyperliquid delisted JELLYJELLY after a shadowy whale’s audacious shorting spree sent shockwaves through the exchange, nearly sinking its HLP Vault with a $12 million loss in a matter of minutes.

The situation started earlier today when a trader opened an $8 million short position on JELLYJELLY, a low-cap token valued at around $20 million at the time, according to data tracked by Abhishek Pawa, AP Collective founder. The trader then deliberately removed margin, forcing Hyperliquid’s liquidity vault (HLP) to inherit and auto-liquidate the massive short position.

The trader allegedly bought JELLYJELLY tokens elsewhere, pumping the token’s price on-chain, driving it higher and forcing their own position into liquidation.

The liquidator vault absorbed the remaining short position, which was around $12 million unrealized loss as JELLYJELLY’s price continued to climb. The token’s market cap peaked at around $50 million before delisting.

Taking advantage of the manipulated short squeeze and Hyperliquid’s forced liquidations, a newly created wallet starting with “ 0x20e8 ” opened a long position on JELLYJELLY. As the price skyrocketed, the trader swiftly pocketed over $8 million in profits.

At the time, if JELLYJELLY’s price continued to rise and reached a $150 million market cap, Hyperliquid’s liquidator vault faced the risk of full liquidation. Those fears escalated as Binance and OKX announced they would list the token on their futures markets.

Following these announcements, Hyperliquid paused trading of JELLYJELLY. The exchange subsequently confirmed the token’s delisting on X.

Hyperliquid eventually settled 392 million JELLY at $0.0095, earning a $703,000 profit without any losses, according to Lookonchain.