Hyperliquid’s JELLY Fiasco: A Sticky Situation 🍯💸

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Well, folks, it seems Hyperliquid has found itself in a bit of a pickle—or should I say, a JELLY jar. After a kerfuffle involving the JELLY token, the platform has decided to refund all the poor souls who were holding long positions on the slippery little thing. Not only that, but they’ve also given their risk management strategy a good ol’ fashioned tune-up. 🛠️

This whole mess, which caused quite the ruckus in the market, has forced Hyperliquid to take a long, hard look in the mirror. They’ve promised to make things right by compensating the affected traders and, in true corporate fashion, have released a statement that’s about as exciting as watching paint dry. 🎨

According to their latest proclamation on X (formerly known as Twitter, for those of you living under a rock), Hyperliquid has set the settled price for the JELLY token at $0.037555. Apparently, this is supposed to be a win for everyone involved. Sure, Jan. 🙄

Yesterday is a good reminder to stay humble, hungry, and focused on what matters: building a better financial system owned by the people. Hyperliquid is not perfect, but it will continue to iterate and grow through the collective efforts of builders, traders, and supporters.…

— Hyperliquid (@HyperliquidX) March 27, 2025

“Yesterday is a good reminder to stay humble, hungry, and focused on what matters: building a better financial system owned by the people,” the team said, adding “Hyperliquid is not perfect, but it will continue to iterate and grow through the collective efforts of builders, traders, and supporters.” Translation: “We messed up, but we’re trying to look like the good guys here.” 🤷‍♂️

What in the World Happened?

It all started when some bold (or perhaps foolish) trader decided to execute a self-trade of 4 million USDC in JELLY at a price of 0.0095 USDC per token. This little stunt caused the JELLY token to skyrocket more than 4X in a short period, triggering Hyperliquid’s backstop liquidity protocol. 🚀

This short position later led to a significant loss in Hyperliquid’s HLP vault. While the open interest (OI) cap formula dynamically adjusts based on global liquidity and OI on major centralized exchanges (CEXs), the 4M USDC position was within the platform’s existing limits. So, no one saw this coming? Really? 🤔

The real kicker came when the HLP took over the position, sharing collateral with other component vaults. This prevented the triggering of the Auto-Deleveraging (ADL) mechanism for the JELLY short position, and the total loss ballooned to more than $10 million. Ouch. 💸

Fixing the Leaky Ship

In response to this debacle, Hyperliquid has announced several risk management enhancements for its platform. One of the major developments is for HLP Liquidator Vault Adjustments, where the Liquidator vault will now have a tighter cap, representing a small fraction of the total HLP account value. It will also undergo less frequent rebalancing and implement more advanced logic for handling backstop liquidations. 🛠️

Hyperliquid has also made notable changes in Dynamic OI Caps and Onchain Validator Voting process, now granting validators authority to vote onchain for delisting any assets that fall below specific liquidity and market cap thresholds. Because, you know, hindsight is 20/20. 👓

Despite the setback, Hyperliquid remains dedicated to refining its financial ecosystem. The platform has assured users that these measures will fortify risk management, enhance trader protection, and maintain stability across its trading operations. Let’s hope they’re not just blowing smoke. 🌬️

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2025-03-27 23:18