Crypto Traders Coordinate to Liquidate Whale Positions on Hyperliquid

Hyperliquid, a blockchain network specializing in trading, has introduced a new dynamic to the cryptocurrency market by allowing traders to publicly observe the positions held by whales. This transparency has enabled traders to target whales with prominent leveraged positions, aiming to liquidate them in a coordinated effort. Markus Thielen, the head of 10x Research, highlighted that this transparency opens the door for groups of traders to intentionally target these stop levels to trigger liquidations.

Whales, known for their substantial holdings, have traditionally influenced the market through tactics such as stop-loss hunting. However, the recent actions from traders suggest that this balance of power could be shifting. Thielen noted that stop-hunting is being "democratized," with ad-hoc groups now playing a role once reserved mainly for market-making desks or treasury teams at exchanges before tighter regulatory scrutiny.

Thielen also drew parallels between the current crypto market dynamics and the GameStop short squeeze, where small traders flipped the table on Wall Street short-sellers by buying GameStop’s stock, sending it to all-time highs. This coordinated effort by smaller traders to liquidate larger entities is reminiscent of the aggressive short squeezes that drove rapid price spikes during the GameStop saga.

On March 16, a crypto whale opened a 40x leveraged short position at $84,043 for over 4,442 Bitcoin (BTC), worth over $368 million. This move did not go unnoticed, and pseudonymous trader CBB sent out a call on X to gather a team of traders with enough funds to liquidate the whale’s position. Thielen reported that on March 16, Bitcoin surged by 2.5% within minutes, partly because of a coordinated effort to liquidate a whale’s short position on Bitcoin perpetual via Hyperliquid.

The whale has since increased their position to $524 million, and at one point, the whale hunters nearly got their wish when the price of Bitcoin hit $84,583.84. However, some speculate that the exposed short position could be intentional. Hedge fund trader Josh Man suggested that the whale might be purposefully trying to get liquidated, creating a rally from the liquidation of his own short.

Thielen emphasized that it is still unclear if this type of activity will become widespread onchain, but as always, transparency can cut both ways. The democratization of stop-hunting on Hyperliquid represents a significant shift in the crypto market, where smaller traders are now able to challenge the influence of whales through coordinated efforts. This new dynamic could lead to more volatile market conditions as traders adapt to the increased transparency and potential for coordinated liquidations.