The "play people for suckers" at 5 AM, who is directing the extreme market conditions of Hyperliquid XPL?

Written by: KarenZ, Foresight News

At 5:50 AM on August 27, a thrilling extreme market event unfolded on the decentralized derivatives trading platform Hyperliquid: the token XPL (pre-market) launched on its platform skyrocketed nearly 200% in just 5 minutes, followed by a rapid decline, causing a massive short squeeze and community disputes.

Event Review: Crazy 5 Minutes, the Market like a Roller Coaster

According to Hyperliquid market data, the price of XPL began to surge rapidly from 5:50 AM Beijing time on August 27, soaring from around $0.6 to a peak of $1.8 in a matter of minutes, with an increase of nearly 200%. However, this frenzy did not last long—the price fell back to its original state within minutes after reaching the peak, and is currently fluctuating around $0.061.

According to Coinglass data, the short liquidation amount for XPL/USD on Hyperliquid in the past 4 hours reached 17.67 million dollars.

It is noteworthy that at the same time, among centralized exchanges like Binance and Bitget that launched XPL pre-contracts, the price of XPL did not show any significant fluctuations. This discrepancy has raised community concerns about price manipulation.

Behind the scenes: Two addresses profit 27.5 million dollars

Further tracking on-chain data through HypurrScan shows that the address starting with 0xb9c began its layout two days ago (on August 24), initially depositing a total of 10.98 million USDC into Hyperliquid in 6 transactions, and then started to accumulate XPL long positions. At 5:35 AM today, it deposited another 4.993 million USDC into Hyperliquid.

Subsequently, the address starting with 0xb9c began placing multiple buy orders for XPL at 5:36 on August 27 (with individual order sizes mostly between tens of thousands to hundreds of thousands of dollars), and started closing long positions at 5:53. When XPL dropped to around $0.6, this address once again went long on XPL. Currently, the XPL contract position value of the address starting with 0xb9c on Hyperliquid is $8.28 million.

Around 08:10 in the morning, an address starting with 0xb9c "withdrew" nearly 600,000 USDC through two transactions, and there have been no further actions since.

According to the analysis by @ai_9684xtpa, this address directly cleared the entire order book, squeezing all short positions (which are mainly 1x hedging positions), making a profit of 16 million dollars in just one minute.

According to Yu Jin's analysis, the XPL liquidation manipulators on Hyperliquid should have ambushed long positions using 2 wallets, then raised prices to trigger automatic liquidation, resulting in profits of up to 27.5 million. Among them, the address 0xb9c drove up the XPL price, leading to a chain liquidation, ultimately triggering automatic liquidation between 1.1 and 1.2 dollars. The DeBank username "silentraven" (address starting with 0xe417) has ambushed long positions worth 9.5 million dollars on Hyperliquid over the past 3 days at an average price of 0.56 dollars, acquiring 21.1 million XPL. After the liquidation was triggered, the positions were automatically closed at an average price of about 1.15 dollars, yielding a profit of 12.5 million.

Some community users have also pointed their fingers at Justin Sun. @ai_9684xtpa stated, "The rumors are related to Sun because of the constant tracing of the source of funds. This address transferred ETH to a Justin Sun associated address five years ago, but there is no direct evidence proving this is Sun."

Core issue exposed: Structural risks of DeFi perpetual contracts

This incident reveals several key hidden risks of DeFi perpetual contract platforms:

Single oracle dependency makes price manipulation 'as easy as pie': Hyperliquid perpetual contract oracle prices do not rely on any external data, and the funding rate is determined based on the moving average of the Hyperp marked price. XPL, as a pre-issued token, relies solely on a single price oracle, making it susceptible to manipulation. Whales can quickly pump the price through large long positions, easily surpassing the liquidation threshold.

Lack of position concentration control: Whales can "manipulate the market": Currently, most DeFi contract platforms do not set position limits for individual users, allowing whales to influence market prices and liquidation mechanisms through large holdings.

Many users believe that "1x leverage hedging" has extremely low risk and operates steadily, thus relaxing their vigilance against extreme market conditions. However, in the highly volatile cryptocurrency market, even seemingly "safe" strategies can be "vulnerable" in the face of price manipulation and black swan events. The large-scale liquidation of 1x leverage hedging orders this time is a typical example.

@Cbb0fe stated, "During this XPL liquidation event, a 10% hedging operation was conducted on its XPL token assets on the HyperliquidX platform, using 1x leverage for shorting and providing a large amount of collateral for protection, but ultimately still suffered a loss of $2.5 million. The user stated, 'I will never touch such isolated markets again.'"

Revelation

This "five-minute storm" is not only a typical case of market manipulation, but it also exposes the weaknesses of DeFi derivative protocols in risk control, oracle mechanisms, and position management. If improvements are not made, similar issues are likely to arise in other DeFi perpetual contracts or tokenized synthetic asset platforms.

For traders, it is crucial to be aware that in the cryptocurrency market, which lacks clear regulation and robust risk control, even seemingly stable hedging strategies can "instantaneously go to zero" in the face of whale manipulation and extreme volatility. The "tuition fees" of the crypto market are often expensive; respecting risks and making rational decisions are key to long-term survival.