- Massive ETH liquidation triggers $166M outflow, shaking investor confidence in HYPE.
- HLP Vault absorbs $4M loss as forced liquidation disrupts market stability.
- HYPE enters the key support zone, sparking debate on recovery potential.
Disaster struck the Hyperliquid platform when a massive $340 million ETH long position was liquidated, sending its native cryptocurrency, HYPE, crashing. The huge liquidation triggered a wave of investor withdrawals and a sharp drop in AUM (assets under management).
Consequently, Hyperliquid recorded a net outflow of $166 million on March 12, marking the second-largest single-day withdrawal in its history. Adding to the pain, the platform’s HLP Vault suffered a $4 million loss, intensifying selling pressure on HYPE, which plummeted by 6.71% to $12.50.
How a $340 Million Longs Unraveled
A high-leverage trader had initially built up a long position of 175,000 ETH, valued at approximately $340 million.
The trader reportedly secured a floating profit of $8 million, closing 15,000 ETH before transferring 17.09 million USDC in margin back to their address. However, after the trader pulled out the margin, the remaining 160,000 ETH position was liquidated due to an insufficient margin ratio.
The liquidation forced Hyperliquid’s HLP Vault to assume the position at $1,915 per ETH. To minimize market impact and manage associated risks, the platform has begun unwinding the position gradually.
This incident significantly disrupted market stability and led to a surge in withdrawals from HLP Vault depositors, sparking concerns about liquidity risks.
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HLP Vault Losses, Confidence Shaken
The liquidation event resulted in a $4 million loss for Hyperliquid’s HLP Vault. While the platform assured users that this was not due to a security vulnerability or exploit, the large-scale withdrawals show weakened investor confidence.
Hyperliquid claimed that the liquidation stemmed from the trader withdrawing margin while holding unrealized profits, which led to a lowered margin ratio and subsequent forced liquidation.
Despite the recent setback, Hyperliquid maintains a historical profit of approximately $60 million. However, investors remain wary of further instability, given the platform’s susceptibility to large-scale liquidations and market volatility.
HYPE: Buy the Dip?
Following the sharp decline in HYPE’s price, some analysts see this as an opportunity for accumulation. Market analysts Johny argue that the token has now entered a strong support zone, which could provide a favorable entry point for long-term investors.
Related: Crypto Market Dip Creates Value Plays in SUI ENA, HYPE & SOL
He further states that the dramatic price drop has driven short-term traders out of the market, potentially stabilizing the token. While sentiment remains divided, many believe that HYPE could recover if market conditions improve and the platform successfully manages liquidation risks.
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