Bitget CEO slams Hyperliquid’s handling of “suspicious” incident involving JELLY token

Gracy Chen, CEO of cryptocurrency speech Bitget, criticized Hyperliquid’s handling of a March 26 incidental connected its perpetual exchange, saying it enactment the web astatine hazard of becoming “FTX 2.0.”

On March 26, Hyperliquid, a blockchain web specializing successful trading, said it delisted perpetual futures contracts for the JELLY token and would reimburse users aft identifying “evidence of suspicious marketplace activity” tied to the instruments. 

The decision, which was reached by statement among Hyperliquid’s comparatively tiny fig of validators, flagged existing concerns astir the fashionable network’s perceived centralization.

“Despite presenting itself arsenic an innovative decentralized speech with a bold vision, Hyperliquid operates much similar an offshore [centralized exchange],” Chen said, aft saying “Hyperliquid whitethorn beryllium connected way to go FTX 2.0.”

FTX was a cryptocurrency speech tally by Sam Bankman-Fried, who was convicted of fraud successful the US aft FTX’s abrupt illness successful 2022. 

Chen did not impeach Hyperliquid of circumstantial ineligible infractions, alternatively emphasizing what she considered to beryllium Hyperliquid’s “immature, unethical, and unprofessional” effect to the event.

“The determination to adjacent the $JELLY marketplace and unit colony of positions astatine a favorable terms sets a unsafe precedent,” Chen said. “Trust—not capital—is the instauration of immoderate speech […] and erstwhile lost, it’s astir intolerable to recover.”

Source: Gracy Chen

Related: Hyperliquid delists JELLY perps, citing ‘suspicious’ activity

JELLY incident

The JELLY token was launched successful January by Venmo co-founder Iqram Magdon-Ismail arsenic portion of a Web3 societal media task dubbed JellyJelly. 

It initially reached a marketplace capitalization of astir $250 cardinal earlier falling to the azygous digit millions successful the ensuing weeks, according to DexScreener. 

On March 26, JELLY’s marketplace headdress soared to astir $25 cardinal aft Binance, the world’s astir fashionable crypto exchange, launched its ain perpetual futures tied to the token. 

The aforesaid day, a Hyperliquid trader “opened a monolithic $6M abbreviated presumption connected JellyJelly” and past “deliberately self-liquidated by pumping JellyJelly’s terms on-chain,” Abhi, laminitis of Web3 institution AP Collective, said successful an X post.

BitMEX laminitis Arthur Hayes said archetypal reactions to Hyperliquid’s JELLY incidental overestimated the network’s imaginable reputational risks.

“Let’s halt pretending hyperliquid is decentralised. And past halt pretending traders really [care],” Hayes said successful an X post. “Bet you $HYPE is backmost wherever [it] started successful abbreviated bid origin degens gonna degen.”

Binance launched JELLY perps connected March 26. Source: Binance

Growing pains

On March 12, Hyperliquid grappled with a akin situation caused by a whale who intentionally liquidated a astir $200 cardinal agelong Ether (ETH) position. 

The commercialized outgo depositors into Hyperliquid’s liquidity pool, HLP, astir $4 cardinal successful losses aft forcing the excavation to unwind the commercialized astatine unfavorable prices. Since then, Hyperliquid has increased collateral requirements for unfastened positions to “reduce the systemic interaction of ample positions with hypothetical marketplace interaction upon closing.” 

Hyperliquid operates the astir fashionable leveraged perpetuals trading platform, controlling astir 70% of marketplace share, according to a January study by plus manager VanEck. 

Perpetual futures, oregon “perps,” are leveraged futures contracts with nary expiry date. Traders deposit borderline collateral, specified arsenic USDC, to unafraid unfastened positions.

According to L2Beat, Hyperliquid has 2 main validator sets, each comprising 4 validators. By comparison, rival chains specified arsenic Solana and Ethereum are supported by astir 1,000 and 1 cardinal validators, respectively. 

More validators mostly lessen the hazard of a tiny radical of insiders manipulating a blockchain. 

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