Here’s why HYPE fell 20% over the past day

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As a seasoned crypto investor with over a decade of experience navigating the digital asset landscape, I’ve seen my fair share of market fluctuations and hiccups. The recent 20% price dip of Hyperliquid’s native token, HYPE, is certainly not uncharted territory for me. However, what sets this event apart is the unique set of circumstances that seem to be unfolding, from a whale sale to potential security concerns and a possible North Korean hacker infiltration.

Recently, the native token of Hyperliquid, known as HYPE, had been climbing steadily for several days. However, today saw a significant 20% decrease in its value, with it being traded at approximately $26.54. Consequently, the market capitalization of HYPE dipped below the $9 billion mark.

On December 22nd, Hyperliquid (HYPE) hit an all-time peak of $34.96, marking an increase from its initial listing price during the airdrop of $11 and accumulating almost double that amount in total profits. At that moment, its market value exceeded $11.5 billion, placing it within the top 20 cryptocurrencies by market capitalization, as reported by CoinGecko.

Introduced in June 2023, Hyperliquid DEX has been growing steadily thanks to its groundbreaking method of waiving transaction fees. This platform offers budget-friendly options on perpetual contracts and trade openings, with the extra earnings channeled back into the system either through token repurchases or by bolstering ecosystem wallets.

The value of HYPE skyrocketed following one of the year’s most eagerly awaited token giveaways. Hyperliquid handed out a record-breaking 310 million tokens to its customers, making it the biggest airdrop in cryptocurrency history.

As a researcher, I’ve observed that my study coin, HYPE, has experienced a downturn amid increasing apprehensions within its community. Consequently, HYPE now stands as the most buzzed-about coin on CoinGecko. In just one day, HYPE plummeted by 26%, reaching an intraday low of $25.77 on Dec 23. This decline has reduced its market capitalization to approximately $8.87 billion, positioning it as the 23rd largest crypto asset at the time of my last update.

Why did HYPE tank?

The cost of HYPE decreased significantly once some community users spotted that a prominent investor, going by the username laurentzeimes, was offloading more than a million HYPE tokens.

The sales were executed using Hyperliquid DEX’s TWAP (Time-Weighted Average Price) mechanism, which splits large orders into smaller transactions over a set period to minimize slippage. So far, within the ongoing TWAP execution, the whale has sold 175,000 tokens.

The decrease in whale holdings occurred simultaneously with worries about North Korean hackers potentially trading on the platform, leading cybersecurity expert Tayvano to hypothesize in a Reddit post that such activity could be aimed at discovering weaknesses in Hyperliquid’s security system.

The specialist emphasized that the problem is particularly worrying because Hyperliquid functions with just four validators, which adds to existing apprehensions.

After the recent discovery, it appears that Hyperliquid has witnessed a significant outflow of approximately $42 million in USDC, which represents its biggest outflow since its debut. This massive withdrawal could potentially worsen the decline in HYPE’s price, according to data provided by Dune Analytics.

Despite some recent setbacks, analysts continue to be hopeful and anticipate that HYPE may regain its momentum, possibly hitting a fresh record peak.

On December 23rd, analyst CJ, who boasts a following of 92.8k, shared an optimistic perspective regarding HYPE. He suggested that if HYPE manages to surpass the significant resistance levels between $30 and $32, it could potentially soar towards a projected target price of around $40.

He noted that while the short-term trend may appear bearish, a drop to $18–$22 could offer traders a strong buying opportunity. However, CJ added that if HYPE’s price rebounds to around $32.3 in the coming days, it would invalidate his prediction.

In my previous analysis, I projected a comparable price objective for HYPE, suggesting it should surpass its all-time peak of $34.8 to validate a bullish trend reversal, with the potential for further growth towards $40.

Hyperliquid’s exceptional performance in the Decentralized Finance (DeFi) sector is substantiating its outlook, as it currently dominates the decentralized perpetual trading market. Last week, its weekly trading volume reached an impressive peak of $98.6 billion, while its Total Value Locked (TVL) surpassed $3.4 billion for the first time this month, marking a significant increase from $188 million in October.

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2024-12-23 13:42