After a 200% surge in 5 minutes, Hyperliquid flash crashed. Who made $27.5 million on it?

Hyperliquid's pre-market token XPL experienced a dramatic flash crash after surging nearly 200% within five minutes on August 27, leading to $17.67 million in short liquidations and significant controversy.

Two addresses capitalized on the event, collectively earning an estimated $27.5 million in profit by strategically placing and closing large long positions during the pump.
The address starting with 0xb9c deposited nearly $16 million USDC to Hyperliquid prior to the event, executed multiple long orders as the price rose, and began closing positions minutes later.
Price manipulation was suspected as the extreme volatility was isolated to Hyperliquid, with no similar price action on major centralized exchanges like Binance or Bitget.
The incident exposed critical structural risks in DeFi perpetual contract platforms, including over-reliance on a single oracle for price feeds and a lack of position concentration controls.
Even low-leverage (1x) hedging strategies proved vulnerable, with one user reporting a $2.5 million loss despite what was considered a safe approach.
The event underscores the need for improved risk management protocols in decentralized derivatives trading to prevent similar market manipulation.

By Karen Z, Foresight News

Starting at 5:50 a.m. on August 27, the decentralized derivatives trading platform Hyperliquid staged a thrilling extreme market: the token XPL (pre-market) launched on its platform soared nearly 200% in just 5 minutes, and then quickly fell back, triggering a large-scale short position liquidation and community controversy.

Event Review: Crazy 5 minutes, the market is like a roller coaster

According to Hyperliquid market data, XPL prices began to rise rapidly at 5:50 AM Beijing time on August 27th, soaring from around $0.60 to a high of $1.80, a nearly 200% increase in just a few minutes. However, this surge was short-lived—the price fell back to its original level within minutes of reaching its peak and is currently fluctuating around $0.061.

According to Coinglass data, XPL's XPL/USD short position liquidation on Hyperliquid reached US$17.67 million in the past four hours.

It is worth noting that, during the same period, the price of XPL did not fluctuate significantly on centralized exchanges like Binance and Bitget, which listed pre-market XPL contracts. This discrepancy has raised questions in the community about price manipulation.

Behind the scenes: Two addresses profited $27.5 million

Further tracking of on-chain data through HypurrScan shows that the address starting with 0xb9c began its layout two days ago (August 24), initially depositing a total of 10.98 million USDC to Hyperliquid in 6 transactions, and then began to ambush XPL long orders. At 5:35 am today, it deposited another 4.993 million USDC to Hyperliquid.

Subsequently, the address prefixed with 0xb9c began placing multiple long orders for XPL at 5:36 AM on August 27th (mostly in the tens to hundreds of thousands of dollars), and began closing these long positions at 5:53 AM. When XPL fell to around $0.60, the address again went long on XPL. Currently, the 0xb9c address's XPL contract position on Hyperliquid is valued at $8.28 million.

Around 08:10 in the morning, the address starting with 0xb9c "withdrawn" nearly 600,000 USDC through two transactions, and there was no further action after that.

According to @ai_9684xtpa’s analysis, this address directly emptied the entire order book, squeezing out all short orders (mostly 1x hedging orders), and earned $16 million in just one minute.

According to Yu Jin's analysis, the manipulator of the XPL liquidation on Hyperliquid likely used two wallets to initially place long positions, then pump the price up to trigger automatic liquidations, resulting in a profit of up to 27.5 million. The 0xb9c address, in particular, drove up the XPL price, leading to a series of liquidations, ultimately triggering automatic liquidations between $1.1 and $1.2. A DeBank address with the username "silentraven" (starting with 0xe417) invested $9.5 million in ambush long positions of 21.1 million XPL on Hyperliquid over the past three days at an average price of $0.56. After the liquidation was triggered, the position was automatically liquidated at an average price of approximately $1.15, resulting in a profit of 12.5 million.

Some community users also pointed the finger at Justin Sun. @ai_9684xtpa commented, "The rumors of a connection to Justin Sun stem from tracing back to the source of funds. This address previously transferred ETH to an address associated with Justin Sun five years ago, but there's no direct evidence proving it was Justin Sun."

The core issue exposed: the structural risks of DeFi perpetual contracts

This incident revealed several key risks of DeFi perpetual contract platforms:

Reliance on a single oracle makes price manipulation easy: Hyperliquid perpetual contract price oracles do not rely on any external data; funding rates are determined based on a moving average of the Hyperliquid mark price. As a pre-launch token, XPL relies solely on a single price oracle, making it susceptible to price manipulation. Whales can easily breach the liquidation threshold by rapidly driving up prices through massive long orders.
Lack of position concentration control: Whales can "influence the market": Currently, most DeFi contract platforms do not set a position limit for a single user, allowing whales to influence market prices and liquidation mechanisms through large positions.

Many users believe that 1x leverage hedging offers minimal risk and robust operation, leading them to relax their vigilance against extreme market fluctuations. However, given the high volatility of the crypto market, even seemingly "safe" strategies are vulnerable to price manipulation and black swan events. The recent large-scale liquidation of 1x leverage hedging policies is a typical example.

@Cbb0fe stated, “During this XPL liquidation incident, I hedged 10% of my XPL token assets on the HyperliquidX platform, using 1x leverage for short selling and providing a large amount of collateral for protection, but ultimately still suffered a loss of $2.5 million.” The user stated, “I will never touch this isolated market again.”

Revelation

This "five-minute storm" is not only a classic example of market manipulation, but also exposes weaknesses in DeFi derivatives protocols in terms of risk control, oracle mechanisms, and position management. If not addressed, similar issues are likely to occur in other DeFi perpetual swaps or cryptocurrency-to-equity synthetic asset platforms.

Traders must be aware that in a crypto market lacking clear regulation and robust risk management, even seemingly robust hedging strategies can be wiped out in the face of manipulation by whales and extreme volatility. The crypto market is often expensive, and respecting risk and making rational decisions are key to long-term survival.