Hyperliquid’s pre-launch market for Plasma’s upcoming XPL token saw extreme volatility this week, with prices briefly surging 2.5x and triggering mass liquidations worth over $17 million.
The move was linked to a handful of whales sweeping the order book, forcing the protocol to switch from its standard liquidation process to auto-deleveraging within minutes. Analysts estimate four addresses were behind the short squeeze, pocketing more than $46 million in combined profits.
At the height of the move, XPL/USD contracts on Hyperliquid spiked near $1.80 before quickly correcting, while Binance’s pre-market for the same token peaked at just $0.55. Plasma, a Bitfinex-backed blockchain project focused on stablecoins, recently raised $373 million in an oversubscribed public sale.
Protocol Holds Steady Despite Chaos
Hyperliquid stressed that its systems worked as intended, with liquidation mechanics first hitting the order book before falling back to auto-deleveraging — a safeguard to prevent bad debt when margin runs thin. The platform emphasized that losses were isolated to XPL positions, and no broader impact was recorded across its markets.
“Pre-launch markets are inherently unpredictable,” the team told users, noting that its mark price formula requires sustained order book activity before triggering liquidations, helping to filter out flash spikes.
New Protections Coming
In response to user concerns, Hyperliquid announced new guardrails. A hard cap will now prevent mark prices from exceeding 10x the 8-hour exponential moving average, offering clearer risk limits for overcollateralized traders.
Additionally, mark prices for pre-launch contracts will start factoring in data from external markets, such as Binance, to strengthen price discovery in thin liquidity environments.
Hyperliquid highlighted that its “hyperps” markets intentionally avoid reliance on oracles, instead using internal moving averages to reduce manipulation risk. Still, the new measures aim to encourage liquidity provision and build user confidence.
Native Token Benefits
Despite the turbulence, Hyperliquid’s native HYPE token jumped more than 10% in the past 24 hours, hitting a record high of $51, according to The Block.
The episode underscores both the opportunities and dangers of trading pre-launch assets in permissionless markets. While some traders decried the lack of intervention, others pointed out that Hyperliquid followed its rules exactly, leaving risk management squarely in the hands of participants.
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Source: https://coindoo.com/traders-wiped-out-after-hyperliquid-token-spikes-2-5x-in-sudden-short-squeeze/