While investigative details remain incomplete, a coordinated market-manipulation event on November 13, 2025, inflicted a significant loss on Hyperliquid’s community liquidity pool when an unknown trader engineered a concentrated, leveraged long assault on the POPCAT-denominated perpetual (HYPE) market; using roughly $3 million in withdrawn USDC split across 19 wallets, the actor constructed a roughly $20 million buy wall near $0.21 to lure liquidity, then abruptly removed it once sizable positions—reported between $20 million and $30 million notionally—were in place, precipitating a 43% price collapse and rapid, cascading liquidations that left the protocol’s HLP vault with approximately $4.9 million in bad debt. The sequence, described by market participants as “peak degen warfare,” unfolded over a short operational window following an estimated 13-hour planning phase, and exploited thin liquidity and behavioral responses to visible order book signals. Such order book manipulation tactics are common in crypto markets to induce false liquidity perceptions.
A coordinated, leveraged long assault on POPCAT wiped out $3M collateral and saddled HLP with $4.9M bad debt.
On execution, buy orders aggregated near the specified price level, drawing in counterparties and permitting the attacker to enlarge leveraged long exposure well beyond the initial capital commitment. Distribution of funds across 19 wallets appears to have been intended to obscure intent and delay detection by on-chain observers and risk systems. When the buy wall was cancelled, market depth evaporated and the POPCAT price collapsed, triggering immediate liquidation cascades that consumed available margin and forced automated position closures. Financially, the attacker absorbed the full loss of the $3 million collateral deployment as leveraged positions, conservatively estimated between $20 million and $30 million notional, were wiped out within seconds after the liquidity withdrawal. Despite this self-inflicted capital destruction, the event imposed substantive losses on Hyperliquid’s automated market design, which required the HLP community-owned liquidity vault to absorb approximately $4.9 million in residual bad debt to prevent broader market dislocation. That loss equates to roughly three months of typical pool profits and raised pointed questions about liquidity concentration, automated risk absorption triggers, and systemic resilience. Platform responses included a temporary withdrawal pause, an Arbitrum bridge suspension, and expedited position closures while an internal review was conducted. Observers note this is the third major disruption on Hyperliquid in 2025, and analysts emphasize the need for enhanced liquidity risk management, surveillance of concentrated order-book strategies, and refined safeguards against coordinated destabilization. Additional on-chain tracing shows the initial funds originated from a single exchange withdrawal before being split and redeployed. Recent reports also indicate that the event triggered roughly $63 million in total liquidations across platforms.
