Hyperliquid Modifies Bitcoin and Ethereum Leverage Thresholds Following 50X ETH Margin Call

Following the recent ETH liquidation event that led to a $4 million loss for Hyperliquid's Hyperliquidity Provider vault, the platform revealed it would raise the maximum leverage allowed for Bitcoin and Ethereum trading to prevent such incidents in the future.

During this liquidation event, a large investor had constructed a 50X leveraged long position on Ethereum (ETH) amounting to 160,234 ETH. However, when the market moved against them, causing liquidation, the user was still able to withdraw 17.09 million USD Coin (USDC), exiting in profit before the liquidation was carried out on the Hyperliquid platform.

The HLP vault, which is meant to act as a safeguard, absorbed the $4 million loss (approximately 1% of the vault's TVL of $451 million) from this liquidation. The Hyperliquidity Provider vault or HLP is similar to a collective pool of funds where people deposit funds (in USDC) to gain profits (or incur losses)—proportional to their share—resulting from Hyperliquid's trading activities.

There were rumors that the user might have manipulated the HLP to their advantage by withdrawing equity from the HLP vault in a manner that prompted an auto-liquidation event with the HLP taking the opposite position on the trade.

However, Hyperliquid recently addressed the incident on X, reassuring users that there was no exploit or hack. The platform claimed that their liquidation engine was unable to manage the size of the user's position. The platform also stated that they would increase the max leverage for Bitcoin (BTC) and Ethereum to 40X and 25X respectively to raise maintenance margin requirements for larger positions.

Regarding comments and inquiries on the 0xf3f4 user's ETH long:

To clarify: There was no protocol exploit or hack.

This user had unrealized PNL, withdrew, which reduced their margin, and was liquidated. They ended up with ~$1.8M in PNL. HLP lost ~$4M over the past 24h. HLP's…