In a recent turn of events, the handling of the JELLY token incident by Hyperliquid has sent shockwaves through the cryptocurrency community. Gracy Chen, CEO of Bitget, has openly criticized Hyperliquid for its actions, suggesting that the decentralized exchange’s mismanagement could lead to its downfall, likening the situation to that of the notorious FTX collapse.
Hyperliquid (HYPE) was forced to remove JELLY after suffering an astonishing $10.6 million loss amid concerns about liquidity. This incident raises significant questions about the exchange’s operational integrity. According to Chen, this incident exemplifies how Hyperliquid has transitioned from innovator to a platform lacking basic ethical protocols. She described Hyperliquid’s handling of the situation as “immature, unethical, and unprofessional.”
As the JELLY price skyrocketed by an alarming 230% within an hour—culminating in a cascading failure for Hyperliquid—the fear of a potential liquidation threat loomed large over its treasury. Hyperliquid’s swift decision to delist JELLY, accompanied by promises to compensate users, failed to assuage fears among investors and crypto enthusiasts alike. “Trust—not capital—is the foundation of any exchange,” Chen further noted, asserting that this incident could have broader implications for the DEX space.
Chen highlighted alarming design flaws within Hyperliquid, citing issues like mixed vaults and unrestricted position sizes that increase vulnerability to market manipulation. She warned, “Unless these issues are addressed, more altcoins could be weaponized against Hyperliquid,” urging the platform to implement stricter safeguards to prevent a “FTX 2.0” scenario. The gravity of the situation is evident, as past exchanges have crumbled under the weight of similar mismanagement.
Further complicating matters, the renowned blockchain investigator ZachXBT revealed that a significant short bet in the JELLY market was made by an individual tied to criminal activities, using stolen funds for trading. Such developments add a layer of complexity to Hyperliquid’s dilemma, spotlighting potential systemic risks that could jeopardize the decentralized finance (DeFi) landscape.
The ripple effects of this incident can be felt across the cryptocurrency market, hinting at a crucial need for reforms in decentralized platforms. Investors and traders should remain vigilant as the future of Hyperliquid hangs in the balance and the potential for further turmoil looms large.
