Following a trading incident involving JELLY that resulted in a $10.63 million loss, Hyperliquid has introduced additional security measures.
The problem resulted from a rogue trader who self-traded a sizable JELLY position, which caused a price spike, setting off a liquidation process that led to Hyperliquid’s (HYPE) market-making vault absorbing the loss. In a Mar. 27 post on X, the platform outlined several steps it has taken to improve its risk management.
Stricter limits on the liquidator vault, which serves as an emergency fund to cover losses from failed trades, is one of the key updates. By reducing the cap, Hyperliquid hopes to keep the vault from assuming undue risks that could compromise the platform’s overall stability.
Vault rebalancing has also been decreased. In the past, risk was harder to predict because frequent rebalancing led to sudden changes in exposure. Slowing down this process should create a more stable risk management system.
Another major improvement is how liquidation vault triggers work. Before, if the liquidator vault took a loss, it would automatically pull funds from other vaults. Now, if losses reach a certain level, automatic liquidation will kick in. Instead of distributing risks to other vaults, this update helps to contain them.
Hyperliquid is also improving its open interest caps, which set the maximum amount that traders can bet on a single asset. Now, these caps will dynamically adjust according to market conditions, lowering the chance that the system will be disrupted by sharp price swings.
Furthermore, validators will be able to decide when to remove risky assets through a new voting system. To avoid further issues, a token may be delisted if it drops below safety thresholds. Hyperliquid continues to face difficulties despite these updates.
According to DeFi Llama data, the total value locked in its liquidity vault has dropped from a peak of $540 million in February to $180 million as of Mar. 28. USDC outflows, which surpassed $340 million just hours after the hack, are continuing, with 61.7 million USDC leaving the platform in the last 24 hours, as per Parsec data.
HYPE is struggling to recover as well. The token was trading at around $16 before the incident. It has now fallen to $13.98 as at the time of press, a 3% decrease over the past 24 hours and 59.83% below its peak of $34.96. Additionally, there has been a significant drop in HYPE trading activity, with volume dropping 79.8% to $94.3 million over the past day.
