- POPCAT manipulation forces Hyperliquid HLP to absorb $5 million in losses
- Hyperliquid’s token is currently trading below key EMAs amid bearish momentum
- Retail demand for HYPE has weakened and futures open interest has fallen to $1.56 billion
Hyperliquid’s liquidity provider faced intense pressure after a sophisticated POPCAT manipulation event that left the decentralized derivatives platform exposed to multi-million-dollar losses.
The POPCAT exploit targeted Hyperliquid’s liquidity provisioning system, exposing weaknesses in the platform’s risk management and raising concerns about retail demand and overall market confidence in the HYPE token.
POPCAT manipulation leads to $5 million HLP loss
The POPCAT incident took place on November 12, when traders executed distorted trades in the POPCAT token market using multiple wallets to create an artificial buy wall.
On-chain analysts report that the traders deployed roughly $3 million in USDC from OKX, distributing funds across 19 separate addresses.
Those addresses then opened leveraged long positions totaling nearly $30 million, inflating POPCAT’s price to over $0.21.
Once the fabricated buy wall was removed, POPCAT’s price plunged rapidly, triggering a cascade of liquidations.
Because market liquidity was thin, Hyperliquid’s Hyperliquidity Provider (HLP) system was forced to absorb the resulting positions.
Overall, HLP incurred losses estimated at approximately $4.9–5 million.
The remaining long positions were passed to the Hyperliquidity Provider (HLP) to liquidate.
HLP appears to have lost $4.95M closing out the positions. pic.twitter.com/Qfq9jcy4Mz
— Arkham (@arkham) November 12, 2025
During the crash, POPCAT fell from $0.21 to $0.13, prompting Hyperliquid to close positions manually to limit additional financial damage.
The incident highlights how coordinated large capital flows routed through multiple wallets can destabilize decentralized platforms.
Similar distortion tactics were previously observed with tokens like TST, ZEREBRO, JELLYJELLY and HIFI. Hyperliquid said deposits and withdrawals were eventually restored and trading returned to normal operations.
Impact on Hyperliquid and the DeFi market
The POPCAT event underscores ongoing risks for decentralized exchanges that handle leveraged tokens.
Although HLP absorbed the losses and protected liquidity providers, the episode demonstrates how thin liquidity and concentrated positions can amplify the effects of market manipulation.
Some crypto commentators suggested the attack may not have been profit-driven but intended to damage the reputation of the decentralized platform.
On-chain forensic analysis has examined links between the wallets involved and entities such as BTX Capital, though these allegations have not been proven.
Hyperliquid’s response — including a temporary halt on the Arbitrum bridge — helped contain further instability.
Nevertheless, the incident is likely to weigh on investor confidence, especially as retail demand for HYPE remains subdued while futures open interest has contracted sharply over the past month.
Futures open interest for HYPE fell from $2.08 billion at the end of October to $1.56 billion, signaling reduced risk appetite among traders.
HYPE price reaction to the manipulation
Despite the losses, HYPE showed some resilience immediately after the event.
HYPE briefly rose from $37.77 to $39.39 following mitigation efforts, suggesting that broader retail sentiment toward the token held up in the short term.
However, the token has since pulled back to around $38.09, pointing to a cautious longer-term outlook.
Technical indicators paint a bearish picture: HYPE is trading below the 200-day exponential moving average (EMA) at just under $39, and has failed to clear the 50- and 100-day EMAs near $43.
Momentum indicators, including the MACD and RSI, indicate sustained selling pressure. Analysts warn that a decisive break below the $35 support level could accelerate a decline toward $30.