The decentralized perpetuals exchange Hyperliquid has once again found itself at the center of a market controversy, reportedly suffering a significant “liquidity attack” this week. The incident, which echoes a similar event earlier this year, saw a malicious actor manipulate the price of the meme coin POPCAT, leading to nearly $5 million in losses for the exchange’s core liquidity engine, the Hyperliquidity Provider (HLP). The fallout prompted Hyperliquid to temporarily halt certain deposit and withdrawal services.
The immediate impact became evident in the early hours of today, the 13th, when Hyperliquid paused deposit and withdrawal functionalities for the Arbitrum cross-chain bridge around 00:22 AM UTC. The official reason cited was “system maintenance,” as confirmed by platform screenshots and publicly available ArbiScan transaction records.
On-chain analyst MLMabc quickly surfaced a detailed theory regarding the mechanics of the attack, suggesting the suspension was a direct consequence of a calculated market manipulation. According to MLMabc, a sophisticated trader orchestrated a large-scale long position on POPCAT, seemingly with the intent to artificially inflate its price before a swift reversal. The analyst outlined the sequence of events:
Approximately 13 hours prior to the analyst’s post, a sum of $3 million USDC was withdrawn from OKX and meticulously distributed across 19 distinct wallets. Following this, around 14:45 CET, the perpetrator began placing roughly $20 million in POPCAT long orders, specifically targeting the $0.21 price point.
As these substantial long positions accumulated, the total exposure across the 19 wallets reached an estimated $30 million. The critical phase of the attack unfolded when the trader abruptly removed an eight-figure buy wall. This sudden withdrawal of support triggered an immediate cascade of liquidations, forcing approximately $20 million to $30 million in POPCAT long positions to be forcibly closed. In this scenario, the HLP, Hyperliquid’s active market-making pool, was compelled to passively absorb these liquidated positions.
This manipulative maneuver caused a sharp decline in POPCAT’s price, directly resulting in an estimated $4.9 million loss for the HLP. Hyperliquid subsequently had to manually close these absorbed positions. MLMabc strongly believes the trader’s actions were a deliberate attempt to “interfere with Hyperliquid,” asserting that “no one loses $3 million in seconds due to carelessness,” underscoring the premeditated nature of the attack.
This incident is not Hyperliquid’s first brush with such market volatility. In March of this year, the exchange faced a similar challenge when a trader shorted the Solana meme coin JELLYJELLY. Unexpectedly, JELLYJELLY’s price skyrocketed by an astonishing 429% within an hour, leading to $12 million in unrealized losses for the platform. These recurring events highlight the inherent risks and vulnerabilities within the burgeoning decentralized finance (DeFi) ecosystem, particularly concerning meme coin derivatives.
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