Hyperliquid

The DeFi Darling That Danced with Danger

The Renegades
June 30, 2025 • Estimated Reading Time: 5 minutes

In the wild world of crypto, innovation rarely comes without a few battle scars. Hyperliquid, a fast growing decentralized platform for perpetual futures trading, burst onto the DeFi scene with bold promises: no middlemen, lightning-fast trades, and a new way to think about liquidity.

🗓️ A Promising Rise

At its core, Hyperliquid set out to decentralize what big centralized exchanges like Binance, Bybit, and Coinbase have dominated for years: perpetual futures trading. With its slick interface, unique validator model, and deep liquidity incentives, it quickly became a favorite among DeFi power users.

Its token, $HYPE, surged. The platform’s TVL (total value locked) hit over $500 million. For a while, it looked unstoppable.

Until the cracks began to show.

🚀 Trouble in Paradise:

The Hacks & Scandals

December 2024: The North Korea Scare
When security researcher Taylor Monahan linked blockchain addresses tied to North Korea’s infamous hacking unit to Hyperliquid, panic spread fast.
Users rushed to pull out funds nearly $250 million in USDC vanished from the platform in just 48 hours. Though Hyperliquid Labs denied any breach and assured users that funds were safe, the damage to its reputation was already done.
“No funds lost. No vulnerabilities found,” the team stated.
But in crypto, trust is fragile and fear travels faster than facts.
March 2025: The Jelly Token Meltdown
Just as things were settling down, another fire ignited.
A token called JellyJelly (JELLY) was listed on the platform. A trader opened a massive short position, then manipulated the price upwards, triggering a liquidation cascade that nearly cost the protocol $12 million.
Hyperliquid had to step in manually settling trades and delisting JELLY to contain the chaos. The crisis was averted, but not without raising eyebrows.
Critics questioned the platform’s “decentralized” nature if it could freeze trades and settle manually, how decentralized was it really?

Centralization in a Decentralized World

Despite being a DeFi platform, Hyperliquid’s validator set is surprisingly small just four validators. That means if just three were compromised, a bad actor could potentially hijack the protocol.

While the platform offers non-custodial trading and emphasizes security, this centralization risk remains a major concern among crypto purists and auditors.

The Fallout: Token Turmoil and User Exodus
Unsurprisingly, the $HYPE token took a hit. After soaring past $34, it tumbled to the $25 range, and the platform’s TVL dropped from $540 million to under $200 million.

For a project that once positioned itself as the future of decentralized trading, the hype was cooling fast.

Why Big Exchanges Don’t Like Hyperliquid
Beyond its own troubles, Hyperliquid faces a different kind of resistance from the crypto establishment itself.

Big centralized exchanges (CEXs) don’t love platforms like Hyperliquid, and here’s why:

It’s direct competition. CEXs thrive on trading volume, fees, and control. Hyperliquid threatens all three.

It’s harder to regulate. With no KYC and on-chain trading, platforms like Hyperliquid don’t play by the same compliance rules.

It fragments liquidity. As DeFi grows, so does the migration of users and capital away from centralized players.

Hyperliquid is a reminder that decentralization isn’t just a tech choice it’s a political one.

🔥 The Verdict: Risk, Innovation, and What Comes Next

Hyperliquid isn’t dead. In fact, it’s still pushing updates, improving security, and refining its model. Its team is vocal about decentralization and continues to attract a loyal user base.

But its recent past serves as a cautionary tale: DeFi innovation doesn’t happen in a vacuum. It’s shaped by attackers, regulators, and the delicate dance between central control and user freedom.

Whether Hyperliquid becomes a blueprint for the future or just another chapter in crypto’s turbulent history depends on how it evolves from here.

Further Reading
Here are some of the sources I explored while diving into Hyperliquid’s recent events:

The Block’s report on the massive user outflows after concerns about North Korean-linked activity.
The Halborn Security Blog to understand the technical details behind the JellyJelly token incident.
Checked out Forbes for a critical take on how decentralized Hyperliquid really is.
Crypto.news helpful in explaining the platform’s response and security upgrades post-incident.

This article is also available on Medium for those who prefer reading there.

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