In brief
- Hyperliquid temporarily paused Arbitrum-based deposits and withdrawals.
- A community-owned vault suffered nearly $5 million in losses.
- Onlookers attributed the loss to a potentially malicious Popcat trader.
Hyperliquid traders using Arbitrum-based infrastructure were temporarily unable to make deposits or withdrawals on Wednesday, as the decentralized exchange for perpetual futures appeared to respond to a series of potentially malicious Popcat trades.
Blockchain researcher Conor Grogan was among onlookers on X who said withdrawals were “processing normally” again, less than a couple of hours after Hyperliquid’s users began peppering the project’s Discord server with questions about a potential attack.
“The blockchain is not under maintenance,” an admin for Hyperliquid’s discord server who goes by iliensinc said. “The Arbitrum bridge is temporarily paused. Other deposits and withdrawals should be unaffected.”
Previously, members of Hyperliquid’s Discord server had shared screengrabs of a notice from Hyperliquid’s website, saying “USDC deposits and withdrawals from the Arbitrum bridge are paused for maintenance.”
A community-owned “vault” on Hyperliquid, where users can deposit funds, lost $4.9 million on Wednesday, according to the exchange’s website. The loss was linked to positions being liquidated on the exchange by an individual who goes by MLM on X.
Using $3 million in stablecoins, an individual entered into $20 million worth of long positions across 19 wallets, MLM said. The individual, who was betting on the price of meme coin Popcat to increase, was later liquidated, forcing the community-owned vault to step in, MLM said.
MLM said that Hyperliquid “manually closed the position,” but not before the meme coin’s falling price caused notable losses for the community-owned vault. In recent months, users’ liquidations have caused temporary setbacks for the vault.
The dynamic also led Hyperliquid to delist Solana-based meme coin JELLYJELLY, provoking criticism that the exchange is not as decentralized as people may think.
MLM claimed that the Popcat-linked activity was “clearly a deliberate attempt to mess” with Hyperliquid and the community-owned vault, but the situation hadn’t been acknowledged by the decentralized exchange yet, as of this writing.
Hyperliquid’s status page details no recent incidents, but a transaction on Ethereum layer-2 scaling solution Arbitrum shows an “EmergencyLock” function was triggered.
Decrypt has reached out to Hyperliquid.
Popcat has a market capitalization of $136 million, according to crypto data provider CoinGecko. Although the meme coin’s price had risen 5.6% to $0.13 over the past day, the Solana-based token’s price was still down 91% over the past year.