Whale Trades on Hyperliquid Wipe Out XPL Order Book Triggering Mass Liquidations

Hyperliquid, the top decentralized perpetuals exchange by trading volume, faced chaos on Tuesday when a group of whale wallets bought millions of pre-market XPL tokens, clearing the platform’s order book and triggering mass liquidations.

Blockchain analyst Lookonchain said in an X post that the liquidation cascade began with wallet 0xb9c0, which deposited $16 million USDC into the platform early Tuesday.

Within two minutes, the user purchased 15.2 million XPL, driving the token’s price from $0.60 to $1.80 —a surge of more than 200% that wiped out anyone betting against it with leverage. XPL is the native token of Plasma, the highly anticipated stablecoin-focused blockchain, which is yet to launch.

One of the biggest hits was reportedly suffered by a trader who was liquidated as the spike pushed losses beyond their posted collateral of $7 million. In total, losses for short positions could reach as high as $50 million, with users reporting individual losses ranging from hundreds of thousands to millions of dollars, despite hedging with low leverage and high collateral.

It’s worth noting that the majority of short positions were likely held by users seeking to hedge their XPL presale allocations as the Plasma token is currently trading on pre-markets at more than ten times the public sale valuation.

By the peak, the whales began closing positions between $1.55 and $1.60, locking in what Lookonchain estimated to be a $38 million profit in under an hour.

Hours later, XPL had retraced to roughly $0.60, leaving most retail traders with losses. “Just lost $185k USDC on Hyperliquid $XPL pump,” one user wrote on X, while another said they were “hunted down badly” despite using only 1x leverage.

Despite the drama, the price of HYPE reached a new all-time high of $51 on Aug. 27, per data from CoinGecko.

‘Read the Documentation’

Many traders described the incident as “whale manipulation,” though others argued that the trade was permitted within Hyperliquid’s rules.

In a Wednesday Telegram post, the Hyperliquid team stressed that only XPL positions were affected, no bad debt was incurred, and cautioned that pre-launch markets remain inherently volatile.

Hyperliquid also added that it will introduce a cap limiting price swings to 10 times the token’s eight-hour average price, giving short sellers clearer boundaries. The change wouldn’t have prevented this week’s losses, though; yet, it’s meant to steady markets, the team said, adding that the best solution to the problem is to “onboard more liquidity for these markets to reduce the effects of volatility.”

The team made no indications that there would be compensation for those liquidated, instead pointing users to the protocol’s documentation and emphasizing the risks of trading in thin markets.

“Users are strongly encouraged to read the documentation to understand the mechanics of markets like hyperps and to apply appropriate risk management before trading,” the team said.

Later, Hyperliquid said on Discord that it will use its “normal mark price formula” for pre-launch, high-volatility derivative markets, including “external pre-launch perp prices if available.” The update “has no noticeable effect on most users but improves system robustness,” the team added, and will not affect funding rates or the actual profits and losses of traders.

Still, some argue that allowing such large leveraged bets on a thin market highlights weaknesses in Hyperliquid’s risk controls compared to centralized exchanges, which typically impose position limits and safeguards to prevent single trades from destabilizing the market.