- Hyperliquid’s validator team force-settled JELLY trades, drawing sharp criticism over decentralization and governance practices.
- The exchange’s liquidity vault earned a $700K profit despite market chaos caused by alleged whale manipulation in the JELLY token.
- Arthur Hayes publicly endorsed HYPE, presenting Hyperliquid as a resilient underdog amid backlash and centralization concerns.
BitMEX co-founder Arthur Hayes publicly endorsed Hyperliquid’s native token, HYPE, amid mounting backlash following a controversial market intervention. Hayes described the situation as a battle between an underdog and a powerful force, urging support for the platform’s efforts during the dispute.
Hyperliquid’s troubles began after alleged whale activity caused a sharp price movement in the JELLY token. The manipulation reportedly triggered a short squeeze, resulting in estimated losses of nearly $10 million for liquidity providers operating on the platform.
Validator Team Approves Forced JELLY Settlement
Following the incident, Hyperliquid’s validator team voted to delist the JELLY perpetual contracts and forcefully close all open positions at a fixed settlement price. The decision, aimed at mitigating risk, resulted in strong reactions from users and industry observers who questioned the move’s alignment with decentralized principles.
Despite widespread concerns over LP losses, the platform’s liquidity vault reportedly recorded a net gain of $700,000. Hyperliquid stated that affected liquidity providers would receive compensation, while explicitly excluding the parties involved in the alleged manipulation from any reimbursement.
Backlash Highlights Centralization Concerns
Critics argued that the decision to unilaterally shut down the market resembled the kind of discretionary control seen in centralized platforms. Some users compared the move to mismanagement during high-profile exchange collapses. Bitget CEO Gracy Chen noted that forced settlements risk setting a dangerous benchmark for future interventions.
Further scrutiny emerged after blockchain analyst ZachXBT identified wallets potentially tied to Binance as active participants in the JELLY manipulation. These findings intensified speculation over the scale and coordination behind the price event.
The Hyperliquid incident has renewed discussions over the role of governance in decentralized finance. Balancing transparency, stability, and non-intervention remains a pressing challenge as platforms grapple with high-stakes manipulation and growing user expectations.
