Tracking significant players in the crypto space on the Hyperliquid blockchain has allowed traders to focus on those holding major leveraged positions, in a bid to liquidate their assets in a “democratized” manner, as noted by the head of 10x Research.
Hyperliquid, a platform dedicated to trading, empowers traders to publicly monitor the types of positions that these major players are managing. With leveraged positions, market participants can evaluate potential liquidation points unless further margin is injected, as outlined by Markus Thielen in a March 17 analysis.
Source: 10x Research
“This level of transparency facilitates collaborative strategies where traders can target these liquidation points intentionally,” he stated.
There is a widely held notion in the crypto market that those with substantial holdings, often referred to as whales, can sway market dynamics through strategies such as stop-loss hunting, which aims to trigger the stop-loss orders of other traders and force them to liquidate their positions.
Thielen suggests that recent trading activities indicate a potential shift in this balance of power.
“Essentially, stop-hunting is becoming more accessible, with informal groups now engaging in tactics that were predominantly the domain of market-making teams or treasury departments at exchanges prior to increased regulatory oversight,” Thielen explained.
He mentioned that it remains “uncertain whether this behavior will become commonplace on the blockchain, but as always, transparency has its pros and cons.”
What drives traders to liquidate whales?
This isn’t the first instance of smaller traders attempting to undermine larger stakeholders through coordinated trading strategies.
Thielen compares current attempts to liquidate whales to the GameStop short squeeze, where retail traders outmaneuvered Wall Street short-sellers by buying GameStop’s shares, driving the price to historic highs of over $81 to close their positions.
“This scenario mirrors the situations we observed during the GameStop events of 2020/2021, where aggressive short squeezes caused rapid price increases,” he noted.
Related: A CEO reflects on a significant $4M loss linked to Hyperliquid: Advocating for reduced leverage as positions increase
“When stop-loss levels are triggered, prices tend to move quickly in that direction, providing liquidity for others to settle their trades. We’ve seen similar strategies employed by market makers and exchanges in the crypto industry over the years.”
The search continues for the 40x leveraged Bitcoin short-seller
On March 16, a prominent trader known for making substantial leveraged trades on Hyperliquid initiated a 40x leveraged short position at $84,043 involving over 4,442 Bitcoin (BTC), equating to more than $368 million. This position was at risk of liquidation if Bitcoin’s price exceeded $85,592.
This action did not go unnoticed, as a user known as CBB called on Twitter to assemble a group of traders with the financial backing necessary to liquidate the whale’s position.
Source: CBB
Thielen remarked in the 10x analysis that following this coordinated effort, Bitcoin’s price surged by 2.5% in just minutes, which was partially propelled by the intention to liquidate the whale’s short position on Bitcoin perpetual through Hyperliquid.
The whale has since expanded their holdings to $524 million. At one point, whale hunters were close to achieving their goal when Bitcoin’s price reached $84,583.84, according to CoinGecko.
Source: CRG
However, some speculate that this exposed short position could be a strategic move.
Trader Josh Man suggested in a March 17 post that the whale might be purposefully setting themselves up for liquidation.
“This involves a rather uncommon and not frequently used strategy known as self-liquidation, and this seems to reflect that,” he indicated.
“In such scenarios, the seller is effectively creating a setup intended to trigger a rally from the liquidation of their own short. It’s likely they have a significant long position to offset against the short.”
Source: Josh Man
Magazine: Crypto enthusiasts are fascinated with longevity and biohacking: Here’s the insight