Hyperliquid Delists Surging Solana Meme Coin to Avoid Liquidation Crisis

Decentralized exchange Hyperliquid delisted perpetual futures for the Solana-based meme coin JELLYJELLY on Wednesday, describing the move as critical to ensuring its network’s integrity amid a looming liquidation crisis.

Hyperliquid uses its own high-speed blockchain, built upon the Ethereum layer-2 network Arbitrum, and the project said its networks’ validators had convened to take “decisive action,” in a post on X (formerly Twitter).

The decision came after a Hyperliquid user opened a $6 million 20x leveraged short on JELLYJELLY that became toxic as the meme coin’s price rose. On X, spectators speculated that the user may have intentionally tried to liquidate themselves, forcing the decentralized exchange to take over the bad bet as it spiraled out of control.

After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps.

All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data. There is no…

— Hyperliquid (@HyperliquidX) March 26, 2025

On Thursday, JELLYJELLY’s price surged as high as $0.043, according to the crypto data provider CoinGecko. Around 2:30pm Eastern Time, it was changing hands around $0.023, showing a 73% jump in value over the past day. 

Though Hyperliquid said the decision to delist JELLYJELLY was a collective choice, the move sparked criticism as some traders and industry observers argued that it conflicted with decentralized finance, or DeFi, norms.

$HYPE can’t handle the $JELLY

Let’s stop pretending hyperliquid is decentralised

And then stop pretending traders actually give a fuck

Bet you $HYPE is back where is started in short order cause degens gonna degen

— Arthur Hayes (@CryptoHayes) March 26, 2025

“Let’s stop pretending Hyperliquid is decentralized,” Arthur Hayes, co-founder and former CEO of the crypto exchange BitMEX, said on X.

Users that had JELLYJELLY positions on the platform would be “made whole from the Hyperliquid Foundation” at a later date, Hyperliquid said in the post. The Hyperliquid Foundation is a distinct entity that’s responsible for governing the project’s overall direction. 

As the decentralized exchange began unwinding the toxic JELLYJELLY bet, a community-owned vault dubbed the Hyperliquidity Provider (HLP) temporarily took a hit.

The vault, where users can pool funds and potentially earn a return as the HLP executes trading strategies and accrues platform fees, saw its all-time profits dip by $11 million, according to Hyperliquid’s website. Those losses were subsequently reversed.

Still, the development spooked the market for HYPE. The cryptocurrency, which is Hyperliquid’s native token, saw its price fall nearly 14% over the past day to $13.85, as of this writing.

The drama surrounding Hyperliquid on Thursday echoed a $4 million loss that the HLP sustained earlier this month. A user on the decentralized exchange made $1.8 million by liquidating themselves, sticking the HLP with another bad bet instead of selling.

When an investor takes on leverage, they are borrowing funds to control a larger position than they could otherwise. That position is often secured by collateral, which can be automatically sold by an exchange to cover losses if a leveraged bet sours beyond a certain point.

Earlier this month, Hyperliquid said that it would reduce the amount of leverage that traders could access for Bitcoin and Ethereum. The project also said it would increase maintenance margin requirements for leveraged bets teetering toward liquidation.

When Hyperliquid’s validators opted to delist JELLYJELLY on Thursday, $3.7 million in JELLYJELLY positions were settled at a price of $0.0095 per token.

Doug Colkitt, founder of the decentralized trading protocol Ambient Finance, said on X that overriding JELLYJELLY’s so-called oracle price left “the attacker with a small loss.”

On Thursday, crypto exchanges Binance and OKX launched perpetual futures contracts for JELLYJELLY, allowing their users to speculate on the meme coin that was launched as part of a marketing campaign for a podcast app months ago.

The price of meme coins, which trade on little more than vibes, will often jump when an exchange decides to list them. Some X users suggested, without providing evidence, that the crypto exchanges were attempting to “bury a competitor” amid the liquidation drama.

When it comes to the centralization of Hyperliquid’s network, experts raised concerns after North Korean-linked wallets started using the platform in December. At the time, the network had just four validators.

Binance and OKX did not immediately respond to a request for comment from Decrypt.

Edited by Andrew Hayward

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Source: https://decrypt.co/311713/hyperliquid-delists-solana-meme-coin-liquidation-crisis