Key Takeaways
- Hyperliquid’s JELLY market fiasco has deepened the divide between centralized and decentralized exchanges.
- A trader executed a complex strategy to transfer losses to Hyperliquid’s liquidity provider (HLP) vault, triggering a short squeeze.
- The DEX ultimately delisted JELLY to contain the damage, igniting accusations of centralization.
The Hyperliquid JELLY token saga nearly brought the decentralized exchange (DEX) to its knees, exposing the vulnerabilities of high-leverage trading and igniting a fierce debate between centralized and decentralized finance.
What began as a seemingly routine token listing quickly escalated into a multi-million dollar short position that triggered a massive short squeeze, sending JELLY soaring and leaving Hyperliquid’s vault teetering on the brink of collapse.
A High-Stakes Short and a $230 Million Crisis
The Hyperliquid JELLY saga began with a single, calculated move.
On March 26, a trader opened a $6 million short position on JellyJelly (JELLY)—a low-cap token with a market valuation of just $10 million at the time.
The trader then removed the margin, forcing Hyperliquid’s HLP vault—which absorbs liquidated positions—to inherit the short and take on the risk itself.
What followed was financial chaos.
With the position now under HLP’s control, the market reacted.
A short squeeze ensued, driving JELLY’s market cap from $10 million to over $50 million in less than an hour.
Hyperliquid’s losses ballooned to $12 million, while traders on centralized exchanges pounced on the opportunity to profit.
Had JELLY hit $0.15374, Hyperliquid’s entire $230 million vault would’ve been wiped.
CEXs Join the Game, Hyperliquid Cuts Its Losses
As Hyperliquid reeled, a new wallet (0x20e8) opened a large long position, raking in $8.2 million.
The trade was perfectly timed. Binance and OKX quickly listed JELLY perpetual futures, fueling even more activity in the already volatile market.
The trader behind the scheme moved $7.17 million across three Hyperliquid accounts, withdrawing $6.26 million and leaving behind an inaccessible $900,000 balance.
Facing mounting losses, Hyperliquid made a drastic call.
It force-delisted JELLY at $0.0095 per token. The exchange liquidated 392 million JELLY tokens worth $3.72 million—turning a $703,000 profit in the process.
Accusations of Centralization and a DeFi Power Struggle
Hyperliquid’s decision to delist JELLY sparked an immediate backlash.
Critics, including on-chain investigator ZachXBT, accused the platform of making a centralized, FTX-style decision to protect itself—something it hadn’t done in past cases, such as when North Korean hackers funneled funds through the exchange.
Binance and Bitget also criticized Hyperliquid, with Bitget’s CEO likening it to “FTX 2.0”.
]Many DeFi advocates came to Hyperliquid’s defense, claiming the delisting decision was approved by validator nodes in a governance vote that reached quorum in two minutes.
Then, another twist emerged: wallets that had been liquidated to push JELLY’s short onto Hyperliquid’s HLP vault were funded by Binance and OKX.
The lines between fair market activity and coordinated attacks blurred even further.
Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
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