Hyperliquid News Today: DeFi’s Weakness Exposed as Hyperliquid Suffers $4.9M Loss from POPCAT Exploit

Hyperliquid, a decentralized exchange for perpetual contracts, temporarily suspended both deposits and withdrawals on its Arbitrum-based platform on Wednesday, following rumors of a coordinated trading operation involving the

token POPCAT. The halt, labeled as "maintenance" on Hyperliquid’s official site, came after a spike in onchain transactions that led to a $4.9 million deficit in the platform’s community-driven liquidity pool, the Hyperliquidity Provider (HLP). This event has once again brought attention to the risks of price manipulation on decentralized derivatives exchanges, according to .

It appears that a single trader orchestrated the manipulation by withdrawing $3 million in

from the centralized exchange OKX and splitting the funds among 19 different wallets. At approximately 14:45 CET, the trader opened a massive long position on POPCAT, placing $20 million in buy orders at $0.21, as reported by onchain analyst MLMabc. The total position grew to $30 million before the trader suddenly removed the buy wall, causing a wave of liquidations. The HLP on Hyperliquid was left to cover the losses as the position collapsed, with POPCAT’s price dropping further and worsening the situation, as detailed in a .

Hyperliquid responded by manually closing the position, but the episode revealed deeper systemic vulnerabilities. The HLP, designed to protect liquidity providers, suffered losses similar to those seen in March when the Solana-based meme coin JELLYJELLY was manipulated, resulting in $12 million in unrealized losses, as outlined in the same

. Experts observed that even as decentralized exchanges gain traction, they remain exposed to liquidity crises triggered by coordinated, high-leverage trades, as noted by .

The POPCAT incident also affected centralized exchanges, with open interest in the token plunging from $114 million to $41 million as traders rushed to close positions. POPCAT’s price briefly jumped to $0.20 before falling back to its typical range near $0.13, illustrating the artificial volatility caused by the manipulation, according to a

. Trading volume for the token soared tenfold to $230 million, further emphasizing the extent of the manipulation, as also reported in the .

Hyperliquid’s handling of the situation has faced backlash from the crypto community. While the platform highlighted its community-driven risk controls, the decision to manually intervene and close the position sparked debate over its commitment to decentralization. Steven Zheng, Research Director at The Block, commented that the event highlights the platform’s relative lack of maturity compared to centralized competitors, despite its aspirations to lead the decentralized perpetuals market, as mentioned in the

.

At the time of writing, Hyperliquid had not provided a timeline for when deposits and withdrawals would be restored. The exchange’s status page showed no recent incidents, but an "EmergencyLock" feature was activated on

, indicating the temporary freeze, as described by Yahoo Finance. The overall market response was mixed, with HYPE, Hyperliquid’s native token, dropping 2% alongside POPCAT’s decline, as reported by FinanceFeeds.