Hyperliquid's HYPE Drops 10% After $12M JELLY Exploit

Hyperliquid (HYPE) has recently experienced a significant decline, with its value dropping over 10% following a $12 million exploit linked to the JELLY token. This incident has shaken investor confidence and highlighted vulnerabilities within the platform. The Relative Strength Index (RSI) for HYPE plummeted to 36.27, indicating strong bearish sentiment in the market.

The exploit involved a whale investor controlling 124.6 million JELLY tokens, who initially dumped a large amount, causing the price to crash. This forced the Hyperliquidity Provider (HLP) into an involuntary short position. The whale then repurchased the tokens, resulting in a substantial loss of nearly $12 million for HLP. This event has raised significant concerns about the platform's security protocols and its exposure to such risks.

In response to the exploit, Hyperliquid announced the delisting of the JELLY token to prevent further losses, which could have escalated to $230 million. However, the damage to investor confidence was already significant, leading to HYPE’s price plummeting over 10% in just 24 hours. The market capitalization of HYPE dropped below $5 billion as fears of potential instability and similar exploits loomed.

The trading indicators for HYPE have shown a rapid deterioration post-exploit. The RSI dropped to 36.27 from a previous peak of 71 just two days beforehand, signaling a shift in momentum following the negative sentiment surrounding the platform. The RSI serves as a momentum indicator, ranging from 0 to 100, with readings above 70 indicating overbought conditions and values under 30 implying an oversold state. Levels between 30 and 50 point to bearish pressures, which is where HYPE currently stands.

With the RSI hovering around 36.27, HYPE is approaching oversold territory, indicating that sellers are currently dominant in the market. If this trend persists, it could lead to further declines unless a reversal occurs. Additionally, HYPE’s BBTrend indicator has decreased from 10 to 6.97 post-exploit. This indicator assesses the strength of price trends based on the variation of Bollinger Bands and remains above the critical level of 3, suggesting that while momentum is weakening, it has not yet been lost completely.

If negative market conditions persist, HYPE is likely to test the critical support level at $13.91. This potential downturn could be exacerbated by the formation of a death cross, as indicated by the EMA lines that suggest an imminent crossover. Failure to maintain above the $13.91 mark would likely intensify selling pressures. Subsequent support levels are positioned at $12.82 and $12.06. Breaching these levels could lead to heightened downward momentum for HYPE.

Conversely, should HYPE manage to win back positive sentiment, it may look to retest the resistance at $17.03. This level was approached recently, but attempts to break through were unsuccessful. A successful breakout above $17.03 could set the stage for further rallies towards $21 and potentially $25.87, marking a significant recovery and revitalization for HYPE since its last trading levels above $24 earlier in February.

The series of events surrounding the JELLY exploit has left a lasting impact on Hyperliquid and its token HYPE. As the market digests the fallout, key support and resistance levels will dictate the future price action of HYPE. Investors and traders alike should remain vigilant in observing the evolving landscape to navigate potential volatility cautiously.