Trader Burns $3M Just to Blow a $5M Hole in Hyperliquid’s Vault

CT and Hyperliquid woke up to one of the strangest episodes in on-chain trading this week: someone willingly burned $3 million just to knock nearly $5 million out of the platform’s Hyperliquidity Provider (HLP) vault.

No profit motive, no getaway plan, no disguised arbitrage loop. Just a trader lighting a small fortune on fire to see what breaks, and onchain sleuths are still trying to make sense of it.

How it happened

According to blockchain analysts, the sequence kicked off when the trader withdrew 3 million USDC from OKX, split it across 19 fresh wallets, and funneled the funds into Hyperliquid.

From there, the trader opened 5x leverage on HYPE longs worth over $26 million, all tied to Hyperliquid’s POPCAT-denominated perpetual contract.

Then came the key move: a $20 million buy wall parked around $0.21. It looked like real support, and naturally, traders responded the way traders usually do when they spot a wall, they leaned on it.

Except the wall wasn’t real.

As the market pushed upward for a while, the order was pulled. Liquidity thinned instantly, support disappeared, and the house of leveraged cards came down. Dozens of traders were liquidated in the cascade, and the HLP vault ended up absorbing $4.9 million in losses.

As for the attacker, their entire $3 million was completely wiped out. No profitable exit trade. No hedge revealed. Just pure capital combustion. Some on CT say this wasn’t a money play at all, it was someone trying to stress-test the system by force.

Community Theories, “Performance Art,” and a Brief Withdrawal Pause

As expected, Hyperliquid’s community had… opinions. @SchizoRetardio on X suggested that the trader might have hedged the move somewhere else.

One other called it the “most expensive research ever.”

Another user described the whole episode as “peak degen warfare,” pointing out that any perp venue without deep liquidity buffers is always one ambitious trader away from chaos.

Around the same time, one user jconorgrogan noticed that Hyperliquid’s bridge briefly stopped processing withdrawals.

Developers later confirmed the contract had been locked using an emergency function, and withdrawals resumed roughly an hour later. There’s still no official link between the pause and the POPCAT incident.

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