Jelly Mess! HyperLiquid Fixes Disaster 🤪

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Well, bless my soul! HyperLiquid, in its infinite wisdom, has decided to rearrange the furniture after a rather unpleasant incident involving its Hyperliquidity Provider (HLP) vault. Seems someone left the jelly out in the sun, and it got a bit sticky.

As a grand gesture of goodwill, the HyperLiquid Foundation is handing out refunds to those poor souls who were holding JELLY long positions when the whole shebang went down. They’re using a closing price of $0.037555, which, I reckon, is supposed to make everyone feel all warm and fuzzy inside. Except, of course, for those with “flagged addresses.” Can’t have everyone getting a free lunch, now can we? 🤨

This whole fandango started after they yanked JELLY perpetual contracts off the market quicker than a greased pig at a county fair. Seems some folks thought there was somethin’ fishy goin’ on. 🐟

What in Tarnation Happened?

The story goes that a fella, or perhaps a scoundrel, tried to pull a fast one by fiddling with the price of JELLY. This caused HLP, that fancy market-makin’ vault, to suffer a case of the vapors, losin’ a heap of unrealized gains.

This here varmint, who was sittin’ on $4.85 million worth of JELLY, decided to mix a short position on HyperLiquid with some on-chain spot buys. This triggered a liquidation event that sent the short position a-tumblin’ right into HLP’s lap. As this scalawag aggressively bought up JELLY on them decentralized exchanges, the price shot up faster than a rocket, causin’ HLP’s unrealized losses to balloon to a whopping $13.5 million! 💸

Now, since the liquidity on them decentralized exchanges ain’t exactly overflowing, the price went a bit haywire. HyperLiquid, in its infinite wisdom (again!), decided to shut down the JELLY market and settle it at a measly $0.0095, which is considerably less than the $0.50 that the decentralized exchange oracles were squawkin’ about.

This decision stirred up a hornet’s nest in the crypto community, with some folks questionin’ whether it was even legal. ⚖️

Meanwhile, Bitget CEO Gracy Chen, bless her heart, threw a bit of shade at HyperLiquid, warnin’ that it could end up like FTX. She reckons that this decision, made by a small group of validators, raises a few eyebrows about this decentralization they keep jabberin’ about.

Chen also pointed out some structural shortcomings, like mixed vault risks and a lack of transparency. BitMEX co-founder Arthur Hayes, never one to mince words, echoed her sentiments, questionin’ HyperLiquid’s claims of decentralization. 🗣️

HyperLiquid’s Fix-It Plan

Well, after all this hullabaloo, HyperLiquid has decided to make some changes to its risk management systems. Seems like a good idea, considerin’.

First off, the Liquidator vault within HLP will have tighter restrictions, meaning it won’t hold as much of the total HLP account value. They’re also gonna rebalance it less often, and use a fancier system to handle liquidations. Sounds like a plan!

Second, the automatic deleveraging (ADL) process will only kick in if the Liquidator vault’s losses go over a certain limit. This should keep funds from bein’ automatically snatched from other vaults to cover up the mess. 👍

Third, they’re gonna adjust open interest (OI) caps more often based on market size, to make sure they actually reflect what’s goin’ on. Finally, they’re adding an on-chain voting system so validators can decide whether to kick out assets that fall below certain levels. Good riddance!

“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.”

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2025-03-29 08:04