Hyperliquid’s $4M Loss: How a Trader Used Liquidations to Cash Out

In the high-stakes world of crypto trading, liquidity can be both a weapon and a weakness. A recent trade on Hyperliquid’s HLP vault wiped out $4 million—not due to a bug or an exploit, but through a calculated move that exploited market mechanics. A trader turned $10 million USDC into a $271 million Ethereum long position, walked away with $1.8 million in profit, and left HLP to absorb the loss. It is considered as a biggest single day loss since its launch in May 2023. Crypto analyst Three Sigma is questioning whether protocols relying on liquidations are playing into the hands of savvy traders.