JELLY Token Surges 400% as Hyperliquid Halts Trading Over Manipulation

- JELLY token price surges 400% in a day - Hyperliquid shuts down after detecting manipulation attempt [Unblock Media] The short-selling manipulation incident involving JELLY tokens on the DeFi platform Hyperliquid has sparked significant controversy in the cryptocurrency market. This incident resulted in substantial losses for liquidity providers and raised many questions about the principles of decentralization. The incident began when a trader used complex liquidation strategies to deliberately cause losses to liquidity providers. The trader executed a large-scale short sale of JELLY tokens, then induced a price increase to make their opposing position favorable. This strategy caused the price of JELLY tokens to surge by approximately 400% in a single day. Hyperliquid identified this as 'suspicious market activity' and acted by forcibly closing the JELLY futures market at $0.0095. This action was aimed at preventing the liquidation of the trader's short position and avoiding further market disruption. As a result, the trader managed to withdraw around $6.26 million, but over $1 million of this amount was frozen by the platform. The biggest losers were the platform's liquidity providers. As the key players who deposit assets to facilitate the smooth operation of the exchange, they suffered significant losses due to the sudden price distortion and liquidation pressure. This incident highlighted the complexity and risk management limitations of DeFi platforms. Following the incident, Hyperliquid explained that it had taken the action through a 'governance vote', but doubts about the principles of decentralization remain. The essence of DeFi lies in operating transparently and autonomously without centralized authority. However, the centralized interventions like delisting and withdrawal restrictions, as seen in this incident, have raised criticism regarding Hyperliquid's level of decentralization. Experts evaluate this case as an example where the limits of decentralization became apparent in responding to market manipulation, fueling discussions on the need for some degree of central coordination in DeFi. This incident demonstrates the importance of risk management systems and governance design for a sustainable ecosystem, beyond mere code-based finance. Hyperliquid must now reveal a transparent response process and establish measures to protect liquidity providers in order to restore the platform's trust.