Gracy Chen, CEO of Cryptocurrency Exchange Bitget, criticized Hyperliquid's handling of an incident of March 26 against his constant exchange and said it was the danger of becoming “FTX 2.0”.
On March 26, Hyperliquid said that a blockchain network specialized within the trade said that Perpetual -Futures had triggered the Jelly token and reimbursed users after they’d identified “evidence of suspicious market activities” that were certain to the instruments.
The decision, which was achieved by a consensus among the many relatively small variety of hyperliquid validators, marked existing concerns in regards to the perceived centralization of the favored network.
“Although hyperliquid is a brave vision as an modern decentralized exchange, he works more like an offshore [centralized exchange]”, Said Chen, after saying,” Hyperliquid may very well be on the proper track to turn into FTX 2.0. “
FTX was a cryptocurrency exchange fried by Sam Bankman, which was convicted of fraud within the United States after FTX's abrupt collapse in 2022.
Chen doesn’t accuse specific legal violations and as a substitute emphasized what she considered the event as “unethical and unprofessional” response of hyperliquid to the event.
“The decision to shut the $ Jelly market and force the settlement of positions at an inexpensive price is a dangerous precedent,” said Chen. “Trust – not capital – is the idea of an exchange […] And as soon because it is lost, it is nearly unattainable to get better. “
Source: Gracy Chen
Jelly incident
In January, the Jelly token was launched by Venmo co-founder IQRAM Magdon-ISMail as a part of a Web3 social media project called Jellyjelly.
According to Dexscreener, it initially achieved a market capitalization of around 250 million US dollars before it fell to the only -digit million in the next weeks.
On March 26, Jelly's market capitalization rose to around 25 million US dollars after Binance, the preferred crypto exchange on this planet, his own everlasting futures related to tokens.
On the identical day, a hyperliquid dealer opened “an enormous short position of USD 6 million on jellyjelly” and “deliberately liquidated by pumping Jellyjelly's price on chain,” said ABHI, founding father of Web3 Company AP Collective, in an X-Post.
The Bitmex founder Arthur Hayes said that the primary reactions to hyperliquids jelly incident overestimated the potential fame risks of the network.
“Let us stop doing it as if hyperliquid is decentralized. And then we then stop doing dealers actually [care]”, Said Hayes in an X -Post.” I bet you’re back, where is there again [it] Started in a short while and caused swords. “
Binance launched Jelly perpetrators on March 26. Source: Binance
Growing pain
On March 12, Hyperliquid separated with an identical crisis attributable to a whale that deliberately liquidated a position of the long ether (ETH) of around 200 million US dollars (ETH).
The trade costs within the liquidity pool of Hyperliquid, HLP, around 4 million US dollars after forced to handle the pool at unfavorable prices. Since then, Hyperliquid has increased the safety requirements for open positions with a view to “reduce the systemic effects of enormous positions with hypothetical market effects when closing”.
Hyperliquid runs the preferred lever petual trading platform and, based on a January report by Asset Manager Vaneck, controls around 70% of the market share.
Perpetual future or “perpetrators” are futures contracted without expiry date. The dealers can insert margin security corresponding to USDC to secure open positions.
According to L2Beat, Hyperliquid has two fundamental validator sets, each with 4 validators. Compared to this, competing chains corresponding to Solana and Ethereum are supported by around 1,000 and 1 million validators.
More validators generally reduce the danger of a small group of insiders to control a blockchain.
