Gracy Chen, CEO of Cryptocurrency Exchange Bitget, criticized Hyperliquid’s handling of the March 26 incident, saying there was a risk that the network would become “FTX 2.0.”
On March 26, Hyperliquid, a blockchain network specializing in trading, said it would list permanent futures contracts for jelly tokens and refund users after identifying “evidence of suspicious market activity” related to the equipment.
This decision was achieved by consensus among relatively few validators in Hyperliquid, flagging existing concerns about the perceived centralization of popular networks.
“Even though its status as an innovative, distributed exchange with a bold vision, high lipids behave like offshore,” Chen said.
FTX was a cryptocurrency exchange run by Sam Bankman-Fried, who was convicted of fraud in the US after FTX collapsed in 2022.
Chen did not accuse high lipids of a specific legal violation, but instead highlighted what she considered a “immature, unethical, unprofessional” response to the event.
“The decision to close the $jelly market and force position settlement at a favorable price sets a dangerous precedent,” Chen said. “Trust, not capital, is the basis for any exchange (…), and once lost, it is almost impossible to recover.”
sauce: Gracie Chan
Related: Hyperliquid abolishes Jelly Perps, citing “suspecting” activities
The Jelly Incident
Jelly Token was launched in January by Venmo co-founder Iqram Magdon-Ismail as part of a Web3 social media project called Jellyjelly.
It initially reached a market capitalization of around $250 million, before falling to millions later, according to DexScreener.
On March 26th, Jerry’s market capitalization surged to around $25 million after Binance, the world’s most popular crypto exchange, launched its own enduring future tied to tokens.
On the same day, the high-lipid trader “opened a massive $6 million short position in Jerry Jerry,” and “deliberately self-cleansed by pumping the price of Jerry Jerry chains,” Abhi, founder of Web3 Company AP Collective, said in X Post.
Bitmex founder Arthur Hayes said the early response to Hyperliquid’s jelly incident has overestimated the network’s potential reputation risk.
“Stop pretending to be high fat, and then stop pretending to be a trader (care),” Hayes said in the X-Post. “Your $hype is back where (it) started in a short order.
Binance launched Jelly Perps on March 26th. source: Binance
Growing pain
On March 12, high lipids tackled a similar crisis caused by whales that deliberately settled a long ether (ETH) position of about $200 million.
Trade spent about $4 million in losses after depositors forced their Hyperliquid liquidity pool to rewind trade at a disadvantageous price on the pool. Since then, high lipids have increased the secondary requirement for open positions to “reduce the systemic effects of large positions with hypothetical market impacts at closure.”
High lipids operate the most popular leveraged perpetual trading platform, managing around 70% of the market share, according to a January report by Asset Manager Vaneck.
Permanent futures, or “PERPS,” take advantage of future contracts that have no expiration dates. Traders deposit collateral for margins such as USDC to ensure open positions.
According to L2Beat, Hyperliquid has two main sets of verification devices, each consisting of four balloters. In comparison, rival chains such as Solana and Ethereum are supported by approximately 1,000 and 1 million validators, respectively.
More validators generally reduce the risk that small groups of insiders will manipulate the blockchain.
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