Hyperliquid Adjusts Leverage limits After ETH Liquidation Loss
Hyperliquid, a popular trading platform, faced a $4 million loss in its Hyperliquidity Provider (HLP) vault due to a recent Ethereum (ETH) liquidation event.the platform plans to increase the maximum leverage for Bitcoin (BTC) and ETH trading to prevent similar incidents.
In this event, a large trader, or whale, held a 50X leveraged long position on ETH, totaling 160,234 ETH.When the market turned against them, the trader managed to withdraw 17.09 million USD Coin (USDC) before the liquidation was completed on Hyperliquid. The HLP vault, which acts as a safety net, absorbed the $4 million loss.
The HLP vault is a shared fund where users deposit USDC to earn profits or face losses based on their stake in hyperliquid’s trading activities. Some speculated that the trader manipulated the HLP to their advantage. However, Hyperliquid clarified on X that there was no exploit or hack.
The platform admitted that its liquidation engine couldn’t handle the size of the trader’s position. To address this, Hyperliquid will increase the maximum leverage for BTC and ETH to 40X and 25X, respectively. This change aims to increase maintenance margin requirements for larger positions.
Hyperliquid reassured users that the incident was not due to a protocol flaw. The trader had unrealized profits and losses (PNL), withdrew funds, and was subsequently liquidated. The trader ended up with about $1.8 million in PNL, while the HLP lost around $4 million.
