Bitget CEO Gracy Chen has blasted Hyperliquid’s response to an incident that occurred on its perpetual exchange on March 26 and warned that it might turn into “FTX 2.0.”
On that day, Hyperliquid—a blockchain network focused on trading—delisted perpetual futures contracts for the JELLY token and promised user reimbursements after detecting “suspicious market activity.” However, the decision was made by a small group of validators, raising concerns about the network’s centralization.
“Hyperliquid presents itself as an innovative decentralized exchange, but it operates more like an offshore centralized exchange,” Chen remarked, reinforcing her claim that it could follow FTX’s path.
FTX, a crypto exchange led by Sam Bankman-Fried, collapsed in 2022, with its founder later convicted of fraud in the US. Chen labeled Hyperliquid’s handling of the event “immature, unethical, and unprofessional,” even if she did not charge it with legal transgressions.
She further criticized Hyperliquid’s decision to close the JELLY market and force settlements at favorable prices, warning that such actions damage trust, the foundation of any exchange.
The JELLY Incident
JELLY, launched in January by Venmo co-founder Iqram Magdon-Ismail as part of the JellyJelly Web3 social project, initially reached a $250 million market cap before plummeting to single-digit millions, according to DexScreener.
On March 26, its market cap surged to $25 million after Binance introduced perpetual futures for the token. That same day, a trader on Hyperliquid allegedly opened a massive $6 million short position on JELLY and then manipulated the price to trigger self-liquidation, according to Abhi, founder of Web3 firm AP Collective.
BitMEX founder Arthur Hayes downplayed the impact on Hyperliquid’s reputation, arguing that traders don’t care about decentralization, stating, “Bet you $HYPE is back where it started soon because degens gonna degen.”
Growing Pains
Earlier, on March 12, Hyperliquid faced another crisis when a whale deliberately liquidated a $200 million long Ether position, leading to a $4 million loss for liquidity pool depositors. In response, Hyperliquid raised collateral requirements to minimize the impact of large trades.
Despite its challenges, Hyperliquid dominates the leveraged perpetuals trading market, controlling around 70% of the market share, according to a January report by VanEck.
However, concerns remain over its validator structure. According to L2Beat, Hyperliquid operates with just two validator sets of four members each, compared to thousands or even millions of validators on rival chains like Solana and Ethereum. A small number of validators increases the risk of insider manipulation, fueling skepticism about Hyperliquid’s decentralization claims.
