DeFi Disaster: $4.9 Million VANISHES in HYPERLIQUID Token SHOCKWAVE – What Really Happened?

Tech

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Updated on 13 Nov 2025, 07:40 am

Hyperliquid, a leading decentralized derivatives platform, suffered a substantial $4.9 million loss on Wednesday. The incident stemmed from a highly coordinated manipulation of the POPCAT token. An attacker reportedly withdrew $3 million in USDC from the centralized exchange OKX, dividing it among 19 wallets. These funds were used to establish a massive leveraged long position on POPCAT, estimated between $20 million and $30 million.

The attacker then executed a $20 million buy order near $0.21, artfully driving up POPCAT's price and drawing in liquidity. Once the position was sufficiently inflated, the attacker abruptly canceled their buy orders, triggering a sharp crash in POPCAT's price. This price collapse led to cascading liquidations across leveraged positions on the platform, including the attacker's own collateral, which was lost instantly.

As the attacker's collateral was exhausted, Hyperliquid's community-owned liquidity vault (HLP), designed to absorb liquidation losses, was forced to cover the remaining deficit. This resulted in a bad debt of $4.9 million for the platform, impacting one of the most prominent decentralized exchanges focused on perpetual futures trading. A market participant described the event as "peak degen warfare," highlighting the attacker's strategy of deliberately burning capital to exploit thin depth and trigger automated liquidity absorption mechanisms.

Impact: This event negatively impacts trust in decentralized finance platforms and highlights vulnerabilities in liquidity management and token price manipulation. It may lead to increased scrutiny of DeFi protocols and investor caution. Rating: 7/10.

Difficult Terms: * Decentralized Derivatives Platform: A financial platform that allows trading of contracts whose value is derived from an underlying asset (like cryptocurrencies), without a central intermediary like a traditional bank or exchange. Operations are managed by code on a blockchain. * USDC: A stablecoin, a type of cryptocurrency pegged to the US dollar, aiming to maintain a 1:1 value. * Centralized Exchange (CEX): A cryptocurrency exchange operated by a single company, where users trade directly with each other through the exchange's order books. Examples include Binance, Coinbase, and OKX. * Leveraged Long Position: A trading strategy where an investor borrows funds to increase the size of their bet that an asset's price will rise. It magnifies potential profits but also potential losses. * Liquidity: The ease with which an asset can be bought or sold in the market without significantly affecting its price. High liquidity means many buyers and sellers, leading to smooth trading. * Collateral: An asset that a borrower pledges to a lender as security for a loan. In DeFi, it's used to back leveraged positions. * Cascading Liquidations: A domino effect where the liquidation of one position triggers margin calls for others, leading to further liquidations and price drops. * Community-Owned Liquidity Vault (HLP): A pool of assets on a decentralized exchange funded by users, designed to act as a counterparty to traders and absorb losses from liquidations. In this case, it's owned and managed by the Hyperliquid community. * Bad Debt: A debt that is unlikely to be repaid. In this context, it means the HLP lost funds that cannot be recovered. * Perpetual: Refers to perpetual futures contracts, which are derivative instruments that do not have an expiry date, unlike traditional futures contracts.