Hyperliquid's HYPE Token Drops 14% After $12M JELLY Exploit

Hyperliquid, a prominent platform in the cryptocurrency space, has faced significant challenges following a major short squeeze of the JELLY meme coin. This event has triggered widespread concerns about the platform's security and risk management mechanisms. A whale, holding 124.6 million JELLY tokens, manipulated the token's price to exploit the Hyperliquidity Provider (HLP). The whale first dumped the tokens, causing a sharp price decline and forcing HLP into a massive passive short. Subsequently, the whale re-bought the tokens, driving the price back up and resulting in nearly $12 million in losses for HLP. This exploit has raised serious questions about the platform's risk exposure and security protocols.

In response to the exploit, Hyperliquid announced the delisting of JELLY to prevent further potential losses, which could have amounted to $230 million. However, the damage to investor confidence was already done, leading to a 14% drop in the price of HYPE, the platform's native token, over the past 24 hours. The market cap of HYPE has now fallen below $5 billion as investors react to fears of further instability and the potential for similar exploits in the future.

The Relative Strength Index (RSI) for HYPE has dropped sharply from 71 to 36.27, indicating a rapid shift in momentum following the exploit news. An RSI below 30 suggests oversold territory, while levels between 30 and 50 indicate bearish pressure. With the RSI now at 36.27, HYPE is approaching oversold levels, suggesting that sellers have taken control. This could point to further downside if sentiment does not improve.

Additionally, the Bollinger Band Trend (BBTrend) for HYPE has dropped from 10 to 6.97 after the exploit but has remained in positive territory for six straight days. BBTrend measures the strength of price trends based on the expansion of Bollinger Bands. Values above 3 show strong momentum, while those below 1 suggest sideways action. The drop from 10 to under 7 indicates that trend strength is weakening, but it is still intact. If the BBTrend continues to fall, it may confirm a slowdown in bullish momentum. Combined with the low RSI, this could keep HYPE under pressure unless a reversal takes shape.

If the current correction continues, HYPE could soon test the key support at $13.91. Losing this level would likely add more selling pressure, with the next supports at $12.82 and $12.06. A break below these levels could deepen the downtrend further. On the flip side, if HYPE can recover from the recent negative sentiment, it may retest the $17.03 resistance. If this level is broken and momentum builds, HYPE could push higher to $21, and even $25.87. This would mark its first time trading above $24 since February 22.

The recent events have highlighted the vulnerabilities in Hyperliquid's risk management and security mechanisms. The platform's response to the exploit, including the delisting of JELLY, has been swift, but the damage to investor confidence may take longer to repair. As the market reacts to these developments, the future of HYPE and the safety of users on the platform remain uncertain. Investors will be closely watching for any further signs of instability or potential exploits as they navigate this challenging period.