Hyperliquid whale trader strikes again with long Ethereum (ETH) attacks on community vault

The risk-courting trader who caused outsized losses for one of Hyperliquid’s pools is back again with another Ethereum (ETH) long position. This time, the trader used 25X leverage, once again posing a risk for the exchange.

The whale trader, who caused over $4M in lost liquidity for Hyperliquid’s pool, is back again with another long position on Ethereum (ETH). This time, the trader switched quickly between risky short and long positions on ETH, once again exposing the exchange to potential liquidations. Following the news, the HYPE native token of Hyperliquid fell further, sliding to $12.35.

The new batch of positions is smaller, as the whale deposited $2.3M into Hyperliquid. However, at 25X leverage, the position may have an outsized effect. The positions on the whale’s Hyperliquid account were still active as the crypto market entered another period of volatility. 

On-chain data reveals the whale also moved through GMX, making a 4.08M USDC deposit. Initially, the whale shorted ETH, but then closed the position and moved on to long the asset. The whale secured $177K gains through that position, before shifting to Hyperliquid again.

The Hyperliquid community vault still carries much lower liquidity after taking over the whale’s initial ETH long after liquidation. 

The whale’s new position longed ETH at 25X leverage and shorted Bitcoin (BTC) with 40X leverage. The trader’s new position once again uses the maximum available leverage on Hyperliquid, even after the recent limitation. Previously, the whale took riskier positions when they traded at 50X leverage. 

Trader whale is still in the green after BTC, ETH market moves

Hours after setting up the leveraged positions, the trader whale was still in the money. The positions were in profit after ETH recovered, while BTC slipped under $83,000. 

As of March 13, ETH traded at $1,898.86, while BTC stepped back to $82,952.12. 

The whale’s positions posted relatively small gains above $100,000. However, the ETH funding rate turned red for the long position. The whale entered at $1,886.20 per ETH, as the price hovered just above the liquidation level. 

Without an almost immediate whale rally, the whale threatened to leave Hyperliquid with another toxic liquidated position. 

ETH is currently trying to hold the $1,887 support level, where traders have posted the biggest accumulation of liquidity. ETH remains extremely risky when it comes to liquidations, with $8.22M in total liquidations. 

In the past four hours, ETH saw $4.8M in long liquidations, and $3.42M in short liquidations. The risk for long positions remains outsized, as ETH has been facing a long drawdown in the past three months. A rebound was expected but always delayed by a deeper price slide. Under those conditions, an unexpected rally would benefit leveraged whales the most.

Bybit’s CEO suspects a deliberate strategy

Ben Zhou, CEO of Bybit, believes the whale was intentional in letting a large leveraged position to be liquidated. He sees the high-leverage trade as a potential problem for both DEX and centralized market operators. 

Zhou believes the whale chose an easy way out through liquidation. 

“Essentially what happened was a whale used Hyperliquid liquidation engine to exit. Imagine you opened a 300m long position on ETH with around $15m margin on 50x leverage, how do you exit quick and clean?” commented Zhou on X. 

Zhou proposed a solution used by other exchanges, in which large positions have their leverage lowered automatically. This would not allow whales to exploit the available liquidity and saddle exchanges with toxic debt. Zhou also believes the lowered leverage thresholds on Hyperliquid are still open to manipulation. The other potential vector is to create multiple accounts, which the exchange aims to discourage through screening. 

Zhou claims that because of its large leverage, Hyperliquid is still competitive and that lowering the limitations could be detrimental to the company. Because of this, the DEX is also quite vulnerable to assault.

Despite this, the recent liquidation has also hurt the Hyperliquid community which used the vault for passive income. The involvement of a high-risk trader was a black swan event for the vault, which had previously accrued upward of $4.8M in liquidity.

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