Hyperliquid News Today: DeFi Faces Liquidity Challenges: $3 Million Exploit Reveals Underlying Vulnerabilities

Hyperliquid, a prominent decentralized exchange for perpetual contracts, paused both deposits and withdrawals on Wednesday after a suspected case of price manipulation involving the

POPCAT. The platform labeled this action as "maintenance" in an official notice, following reports that a trader may have orchestrated a coordinated long strategy, which resulted in widespread liquidations and substantial losses for the community-backed liquidity provider (HLP). This event has renewed worries about the susceptibility of onchain derivatives exchanges to the dangers of leveraged trading and thin liquidity.

Data from blockchain analytics provider

, indicates the disruption started when a trader withdrew $3 million in from OKX, then split the funds among 19 separate wallets on Hyperliquid. These wallets collectively opened leveraged long positions on POPCAT, using about 5x leverage to reach a total exposure of roughly $25.5 million. When POPCAT’s price sharply declined—likely after a significant buy wall disappeared—the positions were liquidated within minutes, leaving the trader with $2.98 million in collateral. The HLP was left holding the remaining long positions and suffered an extra $4.95 million in losses after closing them, according to .

An onchain observer known as MLMabc pointed out that the trader seemed to deliberately disrupt the exchange by placing $20 million in buy orders at $0.21 per POPCAT token around 14:45 CET. The total long exposure climbed to $30 million before the price drop set off a chain reaction of liquidations. Hyperliquid’s bridge was taken offline for more than 20 minutes shortly after, likely as a measure to stabilize the platform and prevent additional losses, as per

.

This isn’t the first time Hyperliquid has encountered manipulation. Back in March, a comparable attack involving the Solana-based memecoin JELLYJELLY led to $12 million in unrealized losses for the HLP. Experts note that such incidents highlight the difficulties decentralized exchanges face in handling extreme market volatility, especially with leveraged trades and concentrated positions, according to

.

This latest event has also sparked debate about the broader dangers present in decentralized finance (DeFi). Although Hyperliquid’s team stresses the importance of community-driven risk controls and onchain openness, the situation demonstrates how challenging it is to manage large leveraged trades in fast-moving price environments. At the time of writing, POPCAT had dropped over 30% from its earlier highs this week, and Hyperliquid’s own token, HYPE, was down almost 2%.

Hyperliquid has not provided a timeline for when deposits and withdrawals will be restored, leaving both users and liquidity providers uncertain. This incident is a stark illustration of the vulnerabilities in leveraged trading systems, where swift price changes and coordinated maneuvers can rapidly escalate systemic threats.