Gracy Chen Criticizes Hyperliquid’s Handling of JELLY Token Incident
Growing Pains
The perpetual exchange, Hyperliquid, has faced a series of challenges, including a recent incident involving the JELLY token. The exchange was forced to delist the token and reimburse users after identifying "evidence of suspicious market activity" tied to the instruments. This decision, reached by consensus among Hyperliquid’s relatively small number of validators, has raised concerns about the network’s perceived centralization.
FTX 2.0
Gracy Chen, CEO of cryptocurrency exchange Bitget, has criticized Hyperliquid’s handling of the incident, stating that it may be on the path to becoming "FTX 2.0." Chen emphasizes that Hyperliquid’s response was "immature, unethical, and unprofessional" and that the decision to close the JELLY market and force settlement of positions at a favorable price sets a dangerous precedent.
Trust and Capital
Chen highlights the importance of trust in the foundation of any exchange, stating, "Trust—not capital—is the foundation of any exchange, and once lost, it’s almost impossible to recover." She asserts that Hyperliquid’s actions have compromised this trust and may lead to a loss of confidence in the network.
JELLY Token
The JELLY token was launched in January by Venmo co-founder Iqram Magdon-Ismail as part of a Web3 social media project called JellyJelly. The token initially reached a market capitalization of around $250 million before falling to the single digit millions. However, on March 26, JELLY’s market cap soared to around $25 million after Binance, the world’s most popular crypto exchange, launched its own perpetual futures tied to the token.
Hyperliquid’s Response
Abhi, founder of Web3 company AP Collective, claims that a Hyperliquid trader opened a massive $6M short position on JellyJelly and then deliberately self-liquidated by pumping JellyJelly’s price on-chain. This led to a sharp increase in the token’s value, resulting in significant losses for traders who had short positions.
Arthur Hayes’ Take
BitMEX founder Arthur Hayes believes that initial reactions to Hyperliquid’s JELLY incident overestimated the network’s potential reputational risks. He states, "Let’s stop pretending hyperliquid is decentralized. And then stop pretending traders actually care."
Conclusion
The JELLY token incident has raised concerns about the governance and trustworthiness of Hyperliquid, a popular blockchain network. Gracy Chen’s criticism of Hyperliquid’s handling of the incident highlights the need for improved transparency and accountability in the crypto space. As the market continues to evolve, it is essential for exchanges like Hyperliquid to prioritize trust and capital, ensuring a stable and secure environment for traders and investors.
FAQs
Q: What is Hyperliquid?
A: Hyperliquid is a blockchain network specializing in trading.
Q: What is the JELLY token?
A: The JELLY token was launched by Venmo co-founder Iqram Magdon-Ismail as part of a Web3 social media project called JellyJelly.
Q: Why did Hyperliquid delist the JELLY token?
A: Hyperliquid delisted the JELLY token after identifying "evidence of suspicious market activity" tied to the instruments.
Q: What is the significance of the JELLY token’s market capitalization?
A: The JELLY token’s market capitalization reached around $250 million initially, but it soared to around $25 million after Binance launched its own perpetual futures tied to the token.
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