Bybit CEO on ‘brutal’ $4M Hyperliquid loss: Lower leverage as positions grow

Bybit CEO Ben Zhou commented connected a caller $4 cardinal nonaccomplishment suffered by decentralized speech (DEX) Hyperliquid owed to an Ether whale’s high-leverage trade, noting that centralized exchanges (CEXs) look akin challenges.

On March 12, a crypto capitalist walked distant with $1.8 cardinal and forced the Hyperliquidity Pool (HLP) to carnivore a $4 cardinal nonaccomplishment aft a commercialized that utilized leverage connected the Hyperliquid decentralized speech (DEX). 

The trader used astir 50x leverage to crook $10 cardinal into a $270 cardinal Ether (ETH) agelong position. However, the trader couldn’t exit without tanking their ain position. Instead, they withdrew collateral, offloading assets without triggering a self-inflicted terms drop, leaving Hyperliquid to screen the losses.

Smart declaration auditor Three Sigma said the commercialized was a “brutal crippled of liquidity mechanics,” not a bug oregon an exploit. Hyperliquid besides clarified that this was not a protocol exploit oregon a hack. 

Source: Hyperliquid

Hyperliquid lowers leverage trading for BTC and ETH

In effect to the trade, Hyperliquid lowered its Bitcoin (BTC) leverage to 40x and its ETH leverage allowance to 25x. This increases the attraction borderline requirements for larger positions connected the DEX. “This volition supply a amended buffer for backstop liquidations of larger positions,” Hyperliquid stated. 

In an X post, the Bybit CEO commented connected the trade, saying that CEXs are besides subjected to the aforesaid situation. Zhou said their liquidation motor takes implicit whale positions erstwhile they get liquidated. While lowering the leverage whitethorn beryllium an effectual solution, Zhou said this could beryllium atrocious for business: 

“I spot that HP has already lowered their wide leverage; that’s 1 mode to bash it and astir apt the astir effectual one, however, this volition wounded concern arsenic users would privation higher leverage.”

Zhou suggested a much dynamic hazard bounds mechanics that reduces the wide leverage arsenic the presumption grows. The enforcement said that successful a centralized platform, the whale would spell down to a leverage of 1.5x with the immense magnitude of unfastened positions. Despite this, the enforcement recognized that users could inactive usage aggregate accounts to execute the aforesaid results.

The Bybit CEO added that adjacent the lowered leverage capabilities could inactive beryllium “abused” unless the DEX implements hazard absorption measures specified arsenic surveillance and monitoring to spot “market manipulators” connected the aforesaid level arsenic a CEX. 

Related: Crypto trader gets sandwich attacked successful stablecoin swap, loses $215K

Hyperliquid sees $166M nett outflow

Following the liquidation lawsuit of the ETH whale and the losses the HLP Vault suffered, the protocol experienced a monolithic outflow of its assets nether management. Dune Analytics information shows that Hyperliquid had a nett outflow of $166 cardinal connected March 12, the aforesaid time arsenic the trade. 

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