HyperLiquid faced a ‘tough situation’: Blockworks Research

Blockworks Research analyst Boccaccio explains the HyperLiquid controversy and why they need to adjust risk and margin

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Blockworks Research Analyst Boccaccio | DAS 2025 New York by Mike Lawrence for Blockworks

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Let’s talk about HyperLiquid. 

To recap: A trader took out a relatively large short position on JELLY, then, when the short position was liquidated, HyperLiquid’s vault, HLP, took on the position to wind it down. That’s according to Blockworks Research Analyst Boccaccio.

However, JELLY kept rising, which led to the HLP taking losses, so the team overrode the oracle price — a controversial move — and closed the position. 

The choice to shut the position was perhaps a wise one, despite the controversy. Because then both OKX and Binance listed JELLY futures — a move that Boccaccio called “shady.” While we don’t know exactly what the motives were to list the futures, it was clear that HyperLiquid was struggling at the time, and this context “made it seem like an attack on HyperLiquid.”

“Notably, HyperLiquid is the only DEX that has been able to compete with CEX volumes,” Boccaccio told me. 

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We’re not going to get too into the weeds about the DEX vs. CEX debate or some of the other controversy that’s arisen since, though I know my colleagues at 0xResearch have been closely following this. 

However, the nuance of the situation is pretty important.

“All positions on Hyperliquid are onchain (unlike some other DEXs). The oracle price being overriden was decided by the validator set. This was clearly a nuanced situation, so the team had to take some serious, and potentially controversial action (even though it was decided by the validator),” Boccaccio noted.

“It’s a tough situation: Either let people lose money in the HLP and erode confidence, or close somebody’s position by overriding the oracle price. I think, to an extent, you want your money in a semi-controlled environment, where there aren’t nefarious actors taking advantage of the situation at the expense of your funds/users.”

So, HyperLiquid and HLP will need to adjust both the risk and margin moving forward to try to prevent another similar situation, Boccaccio said. 

But is it anything like what happened at FTX, like BitGet’s Gracy Chen tried to claim? Let’s not kid ourselves.


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