Hyperliquid opened doors to ‘democratized’ crypto whale hunting: Analyst

Crypto whale tracking on the Hyperliquid blockchain has enabled traders to target whales with prominent leveraged positions in a “democratized” attempt to liquidate them, according to the head of 10x Research.

Hyperliquid, a blockchain network specializing in trading, allows traders to publicly observe what type of positions a whale is holding, and since these positions are leveraged, the market can assess the liquidation levels unless an additional margin is added, Markus Thielen said in a March 17 report.

Source: 10x Research

“This transparency opens the door for coordinated efforts, where groups of traders could intentionally target these stop levels to trigger liquidations,” he said.

It’s a common belief in the crypto market that whales with substantial holdings can influence the market through their trading tactics, such as stop-loss hunting, to deliberately trigger other traders’ stop-loss orders and liquidate their positions.

Thielen says the recent actions from traders show this balance of power could be shifting.

“In effect, 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 added.

Thielen told Cointelegraph that it’s still “unclear if this type of activity will become widespread onchain, but as always, transparency can cut both ways.”

Why are traders trying to liquidate whales?

This isn’t the first time smaller traders have attempted to take down larger entities through coordinated trading tactics.

Thielen says crypto traders trying to liquidate whales have echoes of the GameStop short squeeze, which saw small traders flip the table on Wall Street short-sellers by buying GameStop’s stock, sending it to all-time highs of over $81 to liquid their positions.

“This reminds me of the dynamics we saw during the GameStop saga in 2020/2021, where aggressive short squeezes drove rapid price spikes,” he said.

Related: Bybit CEO on ‘brutal’ $4M Hyperliquid loss: Lower leverage as positions grow

“When stop levels get triggered, prices often accelerate in that direction, providing liquidity for others to cover. We’ve seen similar tactics from market makers and exchanges in the crypto space over the years.”

Hunt is still on for 40x leveraged Bitcoin short-seller

On March 16, a crypto whale known for placing large, highly leveraged positions on Hyperliquid opened a 40x leveraged short position at $84,043 for over 4,442 Bitcoin (BTC), worth over $368 million on March 16, facing liquidation if Bitcoin’s price surpassed $85,592.

The move didn’t go unnoticed, and pseudonymous trader CBB sent out the call on X to gather a team of traders with enough funds to liquidate the whale’s position.

Thielen said in the 10x report 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, according to CoinGecko.

However, some speculate the exposed short position could be intentional.

Hedge fund trader Josh Man said in a March 17 post to X that the whale might be purposefully trying to get liquidated.

“So this there is a fairly rare and not widely used technique of self-liquidation and this FEELS a little like that,” he said.

“In such events, the seller is actually creating a bomb designed to go off and create a rally from the liquidation of his own short. One would expect that he has a large offsetting long versus short.”