Bybit CEO’s Hilarious Take on Hyperliquid ETH Liquidation Fiasco 🤣

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So, here’s the latest drama in the crypto world, folks. Bybit’s fearless leader, Ben Zhou, is weighing in on the Hyperliquid ETH whale liquidation that cost the platform a whopping $4 million. Talk about a splash! 🐳💰

According to Zhou, this whale managed to pull off an enormous liquidation with a long position of 175,000 ETH (valued around $340 million) with 50x leverage, and did it so smoothly that it didn’t even cause a market crash. Impressive, right? But also, ouch! 😬

“Why not just try to hit the liquidation price by withdrawing floating P&L [profit and loss] and push the liquidation price up. Once it’s triggered, let HP take the whole position at the liquidation price, so it’s not your problem anymore. HP would suffer some loss,” Zhou quipped, adding a dash of sarcasm to the mix. 🙃

Folks are asking me for my take on Hyperliquid Whale massive ETH position liquidation. To me, this ultimately leads to the discussion on Leverage, DEX vs CEX capabilities to offer low or high leverage. Hear me out:

Essentially what happened was a whale used Hyperliquid…

— Ben Zhou (@benbybit) March 13, 2025

Zhou went on to explain that both centralized and decentralized exchanges often let their liquidation mechanisms absorb long positions when whales get liquidated. In this case, Hyperliquid’s HLP Vault took over the position at around $1,915 per ETH and halved the leverage to cushion the fall. But, you know, at the cost of a $4 million loss. 💸

“That’s one way to do it and probably the most effective one, however, this will hurt business as users would want higher leverage,” Zhou continued, pointing out the obvious. Because, let’s face it, who doesn’t love a bit of risk? 🎢

He also suggested that platforms could use a dynamic risk limit mechanism, which automatically adjusts leverage based on the position size. So, if the position gets bigger, the leverage gets smaller. Simple, right? But, of course, users can still bypass it by using multiple accounts. Because, you know, rules are meant to be broken, right? 🤔

“Even with this current dropped leverage (BTC to 40x, ETH to 25x) on Hyperliquid, it could still be abused, unless they start to introduce CEX level risk management or drop their leverage even lower,” Zhou concluded, throwing shade at the DEX community. 🌟

On March 12, a whale opened a long position on Hyperliquid with 50x leverage for 175,000 ETH worth $340 million. After closing at 15,000 ETH, the whale transferred around 17.09 million USDC (USDC) in margin back to their address. Once the margin was withdrawn, the remaining 160,000 ETH long position triggered a liquidation from the platform’s mechanism. Due to the large liquidation size, Hyperliquid HLP took over the position at $1,915 and worked towards unraveling it. As a result, Hyperliquid lost more than $4 million. But hey, at least the whale made a cool $1.8 million profit. 🎉

In an official statement on its X account, Hyperliquid clarified that the $4 million loss was not due to a protocol exploit or cyber attack. Instead, the user withdrew when they still had unrealized profit and loss, which lowered their margin and led to liquidation. So, it’s all good, right? 🤷‍♀️

Despite the liquidation, the protocol has decided to lower BTC (BTC) and ETH maximum leverage to 40x and 25x respectively to “increase maintenance margin requirements for larger positions.” Because, you know, better safe than sorry. 🛡️

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2025-03-13 11:57