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- Hyperliquid faces severe criticism after a $10.6M loss and delisting of the JELLY token amid liquidity issues.
- Bitget CEO Gracy Chen calls Hyperliquid’s actions unethical, likening them to the collapse of FTX.
- Cybercrime ties and lack of regulations worsen Hyperliquid’s reputation, raising concerns about DEX security.
Hyperliquid has faced severe criticism concerning the management of the JELLY token issue. The collapse resulted in a financial loss of $ 10.6 million and a further weakening of the financial stability of the platform. Gracy Chen, the CEO of Bitget, criticized the actions of the exchange as “immature, unethical, and unprofessional.”
The beginning of the crisis was noticed when the price of JELLY increased by 230% for an hour. This created a liquidity problem on Hyperliquid and had several consequences on other related activities in the system. This led to the token being sold by the exchange’s validator set and removed from its trading platform to prevent further loss.
Stocks started plunging, and this could have led to a $240 million loss. After the announcement of the issue, Hyperliquid had the validator set decide to delist the token due to “suspicious market activity”.
Hyperliquid Faces Chen’s Criticism
Chen additionally expressed her concerns in a post on X. She challenged the operation modality of Hyperliquid. She claimed that the DEX behaved like a centralized exchange. Specifically, Chen’s criticism of this growth was based on concerns related to the absence of proper know-your-customer (KYC) and anti-money-laundering (AML) checks. It was even more shocking when she said that Hyperliquid’s behavior was reminiscent of FTX, the Exchange that fell in 2022.
Arthus Hayes, the founder of BitMEX, supported Chen’s remarks. He expressed his thoughts on X, which include the potential dangers that might arise from the event. Both industry figures claimed that such action by Hyperliquid could harm the reputation of decentralized exchanges.
Manipulation Risks Identified
According to the analytical platform, ZachXBT, one of the prominent traders in Hyperliquid, was found to be involved in cybercrime. This trader employed funds obtained through fraudulent means to make short positions on the platform that were highly leveraged. This led to a decline in the value of its HYPE token.
However, Chen also added many areas of weakness to the proposed layout of Hyperliquid. She further added that the use of mixed vaults and the absence of restrictions on position sizes led to manipulations. These problems led users to unnecessary exposure to risk.
The JELLY incident involving Hyperliquid has led to concerns surrounding decentralized exchanges. Some analysts are now wondering whether this trend could be symptomatic of other problems in the industry. There are clearly some negative implications, as the reputation of the platform has suffered greatly. The case shows the dangers of futures trading environments that are not regulated in the crypto space.
