Gracy Chen, CEO of cryptocurrency change Bitget, criticized Hyperliquid’s dealing with of a March 26 incident on its perpetual change, saying it put the community liable to changing into “FTX 2.0.”

On March 26, Hyperliquid, a blockchain community specializing in buying and selling, mentioned it delisted perpetual futures contracts for the JELLY token and would reimburse customers after figuring out “evidence of suspicious market activity” tied to the devices. 

The resolution, which was reached by consensus amongst Hyperliquid’s comparatively small variety of validators, flagged current issues concerning the widespread community’s perceived centralization.

“Despite presenting itself as an innovative decentralized exchange with a bold vision, Hyperliquid operates more like an offshore [centralized exchange],” Chen mentioned, after saying “Hyperliquid may be on track to become FTX 2.0.”

FTX was a cryptocurrency change run by Sam Bankman-Fried, who was convicted of fraud within the US after FTX’s abrupt collapse in 2022. 

Chen didn’t accuse Hyperliquid of particular authorized infractions, as an alternative emphasizing what she thought of to be Hyperliquid’s “immature, unethical, and unprofessional” response to the occasion.

“The decision to close the $JELLY market and force settlement of positions at a favorable price sets a dangerous precedent,” Chen mentioned. “Trust—not capital—is the foundation of any exchange […] and once lost, it’s almost impossible to recover.”

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

JELLY incident

The JELLY token was launched in January by Venmo co-founder Iqram Magdon-Ismail as a part of a Web3 social media undertaking dubbed JellyJelly. 

It initially reached a market capitalization of roughly $250 million earlier than falling to the only digit hundreds of thousands within the ensuing weeks, according to DexScreener. 

On March 26, JELLY’s market cap soared to round $25 million after Binance, the world’s hottest crypto change, launched its personal perpetual futures tied to the token. 

The similar day, a Hyperliquid dealer “opened a massive $6M short position on JellyJelly” after which “deliberately self-liquidated by pumping JellyJelly’s price on-chain,” Abhi, founding father of Web3 firm AP Collective, said in an X submit.

BitMEX founder Arthur Hayes mentioned preliminary reactions to Hyperliquid’s JELLY incident overestimated the community’s potential reputational dangers.

“Let’s stop pretending hyperliquid is decentralised. And then stop pretending traders actually [care],” Hayes said in an X submit. “Bet you $HYPE is back where [it] started in short order cause degens gonna degen.”

Growing pains

On March 12, Hyperliquid grappled with the same disaster brought on by a whale who deliberately liquidated a roughly $200 million lengthy Ether (ETH) place. 

The commerce value depositors into Hyperliquid’s liquidity pool, HLP, roughly $4 million in losses after forcing the pool to unwind the commerce at unfavorable costs. Since then, Hyperliquid has increased collateral requirements for open positions to “reduce the systemic impact of large positions with hypothetical market impact upon closing.” 

Hyperliquid operates the preferred leveraged perpetuals buying and selling platform, controlling roughly 70% of market share, in response to a January report by asset supervisor VanEck. 

Perpetual futures, or “perps,” are leveraged futures contracts with no expiry date. Traders deposit margin collateral, reminiscent of USDC, to safe open positions.

According to L2Beat, Hyperliquid has two predominant validator units, every comprising 4 validators. By comparability, rival chains reminiscent of Solana and Ethereum are supported by roughly 1,000 and 1 million validators, respectively. 

More validators usually reduce the danger of a small group of insiders manipulating a blockchain. 

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