Whale’s $300M ETH Long Liquidation Tanks Hyperliquid HLP for $4M

A high-leverage trader on Hyperliquid got liquidated on a $285M ETH long, forcing HLP to absorb the loss and eat a $4M hit, while the trader still walked away with profits.

Nattynatman

Posted on Mar 12, 2025

A massive leveraged ETH long just got nuked on Hyperliquid, leaving the protocol’s Hedged Liquidity Pool (HLP) to eat a $4M loss. The move wiped out three weeks of HLP’s gains, sparked FUD, and even sent HYPE token plunging from $14 to $12.50 in a flash crash.

What Happened?

A whale took out a $285M ETH long position with just $14M in collateral, meaning they were running on significant leverage (50x). Their liquidation price was initially around $1,800, but instead of closing the position normally (which would tank the market), they slowly withdrew collateral, inching their liquidation price higher.

Eventually, their liquidation price hit $1,930, forcing them to sell. But here’s where things get interesting: HLP was forced to take on the position.

HLP Took the Hit

Hyperliquid’s HLP vault acts as a backstop for liquidations, meaning when someone gets liquidated, HLP steps in to absorb the position and gradually offload it. In this case, that meant taking on $280M+ of ETH long exposure.

The result? HLP ended up selling at a loss of ~$4M, wiping out its last three weeks of profits. Meanwhile, the whale walked away with $1.8M in realized profit from previous gains.

Hyperliquid quickly clarified: no exploit, no hack - just how HLP is designed. But that hasn’t stopped the comparisons to past incidents, like the GLP “exploit” on GMX, where a trader extracted value by moving AVAX prices on CEXs to profit at the LPs’ expense.

This whale basically "socialized" their risk - instead of taking the loss themselves, they let HLP absorb it.

In response, Hyperliquid has now reduced max leverage for BTC to 40x and ETH to 25x, aiming to prevent similar high-risk scenarios.