Hyperliquid’s pre-launch market for Plasma’s XPL token turned chaotic this week after a whale-driven squeeze sent the price 2.5x higher within minutes, forcing the protocol into auto-deleveraging and wiping out over $17 million in trader positions, mostly shorts.
According to CoinGlass data, four wallets are believed to have coordinated the squeeze, sweeping the order book and driving XPL/USD on Hyperliquid as high as $1.80, compared with a $0.55 peak on Binance’s pre-market. Analysts estimate the addresses collectively booked $46 million in profits. Plasma’s XPL, a Bitfinex-backed stablecoin-focused Layer 1, is still in its pre-listing phase after raising $373 million in July.
Hyperliquid said its systems worked as designed: liquidations first went to the order book and then fell back to auto-deleveraging once margin was insufficient. The team stressed that its “hyperps” use isolated-only margin, meaning losses did not spill over into other markets, and the protocol incurred no bad debt.
Still, the incident rattled confidence in pre-launch perpetuals, with some traders calling for tighter protections. Hyperliquid defended its model as “permissionless by design,” saying markets come with high volatility warnings and traders must manage risk themselves.
To address feedback, two changes will roll out in the next upgrade. First, a hard cap will limit hyperp mark prices to 10x the 8-hour EMA, giving shorts clearer risk parameters. Second, the mark price formula will integrate external perpetual market data where available, such as Binance’s XPL market, to dampen volatility in thin books.
While Hyperliquid insists no rules were broken, the clash highlights the double-edged nature of permissionless pre-launch markets: lucrative for whales who move fast, devastating for retail shorts caught in sudden squeezes.
