In the wake of a trading incident involving JELLY that led to a staggering loss of $10.63 million, Hyperliquid has rolled out new security enhancements.
The issue arose from a rogue trader engaging in self-trading with a large JELLY position, which triggered a price surge that ultimately initiated a liquidation process, causing the Hyperliquid market-making vault to absorb the resulting loss. In a post on March 27 on X, the platform detailed multiple measures it is implementing to bolster its risk management protocols.
One of the primary updates includes stricter limits on the liquidator vault—an emergency reserve designed to cover losses from unsuccessful trades. By lowering the cap, Hyperliquid aims to prevent the vault from taking on excessive risks that could jeopardize the platform’s overall integrity.
Additionally, the frequency of vault rebalancing has been reduced. Previously, the rapid rebalancing made it difficult to predict risk levels due to abrupt changes in exposure. By slowing down this process, the platform seeks to establish a more stable risk management framework.
Another significant enhancement involves the triggers for the liquidation vault. Previously, when the vault incurred a loss, it would automatically siphon funds from other vaults. Now, should losses reach a specific threshold, automatic liquidation will activate, thereby confining risks rather than distributing them across other vaults.
Hyperliquid is also adjusting its open interest caps, which limit the maximum amount traders can wager on a single asset. These caps will now flexibly adapt to prevailing market conditions, reducing the likelihood of disruptions caused by sudden price fluctuations.
Moreover, validators will be empowered to decide when to delist risky assets through a newly established voting system. This measure is intended to prevent future issues, as a token may be removed from the platform if it falls below designated safety levels. Despite these enhancements, Hyperliquid continues to face challenges.
Data indicates that the total value locked in its liquidity vault has plummeted from a high of $540 million in February to $180 million as of March 28. USDC outflows have surpassed $340 million just hours after the breach and continue to flow out, with an additional $61.7 million in USDC leaving the platform in the last 24 hours, according to recent statistics.
The HYPE token is also struggling to rebound. It was trading around $16 prior to the incident but has since dropped to $13.98 at the time of this writing, reflecting a 3% decline over the last 24 hours and a substantial 59.83% drop from its peak of $34.96. Additionally, HYPE trading activity has seen a considerable decrease, with volumes falling by 79.8% to $94.3 million over the past day.