Hyperliquid Halts Deposits and Withdrawals Amid POPCAT Liquidation Saga

Decentralized exchange Hyperliquid temporarily halted deposits and withdrawals on Wednesday following reports that a trader attempted to influence the price of the memecoin POPCAT. The situation led to widespread liquidations, significant losses for its Hyperliquidity Provider, and renewed market unease.

Conor Grogan, a former executive with Coinbase, confirmed that Hyperliquid’s bridge halted withdrawals for more than 20 minutes. Blockchain analytics provider Arkham claimed roughly $5 million in bad debt on POPCAT has been moved to Hyperliquid’s Hyperliquidity Provider (HLP). The stop seemed to have started right after that transfer was made.

$3M POPCAT Bet Sparks $25M Liquidation

According to Arkham’s data, the issue began when a trader removed $3 million from OKX . The funds were split between 19 wallets by the trader. Each wallet opened longs positions on POPCAT with approximately 5x leverage. The amount of the total exposure is almost $25.5 million.

The 19 accounts were liquidated when POPCAT’s price fell. The trader was left with about $2.98 million in collateral. The HLP inherited the remaining long positions and lost another $4.95 million from closing out those positions. On-chain data from ArbiScan showed platform’s bridge went inactive shortly after the liquidations.

MLMabc, an on-chain analyst said the trader tried to long POPCAT at high price. The trader puts buy orders worth $20 million at price of $0.21 per token around 14:45 CET time. Across the 19 wallets, the total long exposure swelled to about $30 million.

POPCAT Crash Deepens Hyperliquid’s Troubles

The price of POPCAT sharply declined following the removal of the big buy wall. The traders was blown out in every account within minutes. The HLP inherited the trades and took on millions of dollars in losses. The team behind Hyperliquid closed out the positions themselves to limit risk.

The trader chose to deliberately disrupt the platform, according to MLMabc. The hold on transactions seems to have been added to stabilizing the system and limiting further losses. 

A similar situation happened in March where Hyperliquid was targeted by a manipulation scheme linked to SOL’s memecoin JELLYJELLY. That incident resulted in some $12 million bof unrealized losses for the community-owned HLP vault. It prompted concerns over leverage controls and the safety of decentralized exchanges.

Deposits and withdrawals have not been given a timeframe for when they would be reinstated by platform. The episode is an example of how leveraged trading and low liquidity can leave decentralized systems open to exploitation. It is also an example of the continued difficulties such platforms face as rapid market shocks play out in real time.