The recent delisting of the JELLY token from the Hyperliquid platform has sparked widespread discussion about the risks in decentralized finance (DeFi), as well as raised questions about market trust and transparency.
Together with an expert from Bitget Research, we took a detailed look at why this incident occurred and how it will affect the market.
The recent delisting of the JELLY token from the Hyperliquid platform has sparked widespread discussion about the risks in decentralized finance (DeFi), as well as raised questions about market trust and transparency.
Together with an expert from Bitget Research, we took a detailed look at why this incident occurred and how it will affect the market.
Hyperliquid, a decentralized derivatives exchange, suffered a massive loss of $10.63 million after the price of its JELLY token skyrocketed by 230%. The surge was caused by manipulation by an attacker, which led to the token being delisted.
The attacker crashed the price with a $6 million short, then intentionally triggered the liquidation of his position. Thanks to a programmed mechanism, the order automatically went to the Hyperliquidity Provider (HLP) fund, after which the trader began to increase the price of the token.
«JELLY’s delisting from the Hyperliquid platform due to suspicions of market manipulation has highlighted the risks in the DeFi space, especially for projects based on hype,» emphasizes Ryan Lee, Chief Analyst at Bitget Research.
The JELLY incident highlighted existing decentralization issues on the Hyperliquid platform, with critics pointing to the limited number of validators and closed-source code as factors that promote centralization and limit participation by a wide range of participants.
«This incident calls into question the viability of projects driven by speculation rather than fundamentals, pointing to their potential difficulties in high market volatility,» emphasizes Ryan Lee of Bitget Research.
In response to these accusations, Hyperliquid denies that validator slots can be purchased and announces a delegation program to promote network decentralization.
It is noted that all users, except those whose addresses have been marked, will be automatically compensated from the Hyper Foundation based on blockchain data in the coming days.
«Following evidence of suspicious market activity, a set of validators gathered and voted to remove JELLY perps. All users, except for the flagged addresses, will be compensated from the Hyper Foundation. This will be done automatically over the next few days based on on-chain data,» the platform said in a statement.
As Ryan Lee adds, while a compensation plan may mitigate the negative impact, the perception of vulnerability to manipulation heightened by alleged ties to centralized exchanges like Binance could increase user caution.
«This indicates the need for DEXs to strengthen risk management and increase transparency to preserve their reputation,» the expert says.
The JELLY incident should be seen as a signal to other DeFi projects about the importance of implementing effective mechanisms to protect against manipulation. Particular attention should be paid to aspects such as liquidity and oversight to avoid similar situations in the future.
Overall, this case highlights the need for a balance between innovation and stability in the DeFi ecosystem to ensure its healthy development and maintain user trust.
«On the other hand, this could simply reflect the natural volatility of the cryptocurrency market, where weaker projects get cut off in its evolution,» summarizes Ryan Lee of Bitget Research.
The Hyperliquid platform experienced significant financial difficulties in December 2024. There was an outflow of funds from the platform that reached $249 million, which is a significant portion of its total volume of funds locked (TVL).
This was preceded by reports of possible North Korean hackers on the platform. Experts indicated that these hackers could be using Hyperliquid to test their capabilities. In particular, Tay Monahan, a security researcher for the MetaMask wallet, noted that these groups are among the most advanced in the world, characterized by high creativity and persistence.
In response to these concerns, the Hyperliquid team assured that there was no hacking by the DPRK or any other source, and that all user funds are completely safe.
