Hyperliquid to Revise Leverage Limits for BTC and ETH Following Recent 50X ETH Liquidation Incident

Following the recent ETH liquidation incident that resulted in a $4 million loss for Hyperliquid’s Hyperliquidity Provider vault, the platform has announced plans to raise the maximum leverage allowed for Bitcoin and Ethereum trading to avert similar occurrences in the future.

During the liquidation event, a whale established a 50X leveraged long position on Ethereum (ETH) amounting to 160,234 ETH. However, when the market moved unfavorably, leading to liquidation, the user managed to withdraw 17.09 million USD Coin (USDC), ultimately exiting with a profit before the liquidation was finalized on the Hyperliquid platform.

The HLP vault, intended to serve as a safety net, absorbed the $4 million loss (approximately 1% of the vault’s total value locked of $451 million) from this liquidation. The Hyperliquidity Provider vault, or HLP, functions as a communal fund where individuals deposit capital (in USDC) to earn gains (or face losses)—relative to their stake—from Hyperliquid’s trading endeavors.

This has led to speculation that the user might have manipulated the HLP to their advantage by withdrawing equity in such a manner that it triggered an auto-liquidation event, with the HLP taking an opposing position on the trade.

Nonetheless, Hyperliquid recently provided clarification on X, assuring users that there was no exploit or hacking involved. The platform stated that their liquidation engine simply could not manage the scale of the user’s position. Additionally, they announced an increase in the maximum leverage for Bitcoin (BTC) and Ethereum to 40X and 25X, respectively, to enhance maintenance margin requirements for larger positions.