From Livermore to Crypto Whales: A Century-Long Trading Shadow War, Decoding the Offensive and Defensive Strategies Behind the $300 Million Orders on Hyperliquid

Author: Frank, PANews

"In all my days as a stock trader, the memory of this day is the most vivid. It was on this day that my profits first exceeded 1 million dollars. It marked the first time I successfully closed a trade according to my pre-planned trading strategy. Everything I had foreseen has become a past fact. However, surpassing all of this is: my fervent dream has become a reality.

On this day, I was the king of the market!"

------ Reminiscences of a Stock Operator

More than a hundred years ago, legendary stock trader Livermore described his success with these words. A century later, in the crypto market, a similar scene seems to be unfolding again. Coincidentally, this time the king of the market also engaged in large-scale trading and succeeded, actively triggering liquidation in a situation of insufficient market liquidity, performing an extreme operation that garnered the market's reverence. The difference is that this time, the profits of the market king were covered by the exchange.

Century Cycle: The On-chain Rebirth of the Wall Street Phantom

This whale invested 6 million dollars with 50x leverage to go long on ETH and BTC just before Trump announced the inclusion of five cryptocurrencies—BTC, ETH, SOL, ADA, and XRP—into the strategic reserve of crypto assets, earning a staggering 6.8 million dollars. Over the past month, this whale repeatedly operated in the market, achieving substantial profits and once again executing a classic battle worthy of being recorded in Hyperliquid's history.

On March 12, this whale once again opened a long position of 160,000 ETH with 50x leverage, withdrew 8 million dollars, and then actively triggered liquidation, ultimately profiting around 1.8 million dollars, while Hyperliquid lost 4 million dollars as a result.

This situation seems logically bizarre, but it essentially exploited a "loophole" in Hyperliquid's on-chain trading to achieve profit.

Let’s review the operation process of this whale:

At 6:54 AM on March 12, this address deposited 3.48 million dollars into Hyperliquid via a cross-chain bridge, opening a position of 17,000 ETH (worth 31.2 million dollars).

Subsequently, this address increased its position to 21,790 ETH (worth 40.85 million dollars) by supplementing margin and continuing to expand the position.

Later, this address continued to add to its position, raising the total ETH position to 170,000 (holding value of 343 million dollars). The paper profit reached 8.59 million dollars.

During this process, this address utilized a total margin of 15.21 million dollars.

Ultimately, by closing positions and withdrawing margin, it recovered 17.08 million dollars, realizing a profit of 1.87 million dollars.

In the final operation, this user withdrew 8 million dollars, retaining about 6.13 million dollars as margin, waiting for forced liquidation.

Hunting Moment: The Precise Calculations Behind the 170,000 ETH Position

Why did the whale operate this way instead of waiting for a profitable exit?

In this process, the whale had two options: one was to close the position directly, realizing a paper profit of 8.59 million dollars. This operation would maximize profits. However, the on-chain counterpart might not be able to absorb such a large order all at once, having to wait for the price to continue falling to reduce profits before executing. If this 343 million dollar order were to be closed actively, it might significantly impact market trends, causing a substantial shrinkage in profits.

Therefore, the whale chose the second option, withdrawing margin and part of the profits (i.e., closing part of the position and then withdrawing the excess margin), keeping the margin at the minimum standard for 50x leverage. This way, if the market continued to rise, he could achieve greater profits and choose to continue closing positions in batches. If the market experienced a rapid decline, he would face liquidation at a 2% drop. However, since he had already withdrawn 17.08 million dollars, the overall profit had already been realized at 1.87 million dollars. Thus, even if liquidation occurred, it would not lead to actual losses.

This seemingly reckless gambler's operation ultimately chose a conservative profit strategy.

In retrospect, according to data released by Hyperliquid, on that day, Hyperliquid lost 4 million dollars (which also included some profits from follow-up trades). Meanwhile, the whale achieved profits exceeding 1.8 million dollars.

In fact, from the perspective of profit and loss ratio, the whale's total investment cost was about 15.21 million dollars, realizing a profit of 1.87 million dollars, with a profit margin of about 12.2%. In terms of percentage and amount, this was not as favorable as the address's profits when Trump announced the inclusion of ADA and SOL in the strategic reserve.

Aftershocks and Insights: Driving the Evolution of On-chain Exchanges

From the market's perspective, this operation ultimately leading the exchange to cover the losses is an extremely rare occurrence. However, this situation seems to only be achievable on Hyperliquid.

According to KOL Hanbalongwang's tweet, a similar incident occurred at OK Exchange in 2018. Using the same method, after profiting, withdrawing margin caused the market to reach a liquidation price that no counterpart could absorb, resulting in the exchange covering the losses.

After the OK incident, various centralized exchanges increased their tiered margin systems to ensure that users' margins remained within a reasonable range in the market. This recent event seems to have provided a lesson for the emerging on-chain exchange Hyperliquid. Due to the entire process adopting DEX trading methods, there was no risk control over margin requirements.

Ultimately, this led to the whale's liquidation, where the market lacked sufficient liquidity to absorb the forced liquidation orders, resulting in Hyperliquid having to cover the losses. HLP data shows that the 4 million dollar loss was almost equivalent to Hyperliquid's entire monthly profit. As of March 10, Hyperliquid's HLP earnings had accumulated to 63.5 million dollars, so even with this order's loss, there remained nearly 60 million dollars in profit.

However, given that this incident sparked heated discussions on social media, there may be users who follow the whale's operations in the future. Hyperliquid also promptly stated that to avoid similar issues, it would adjust the leverage for BTC to 40x and ETH to 25x.

Regarding market speculation on whether this method will fundamentally shake Hyperliquid, we can understand this possibility through calculations: currently, Hyperliquid's HLP pool still holds nearly 60 million dollars in funds. With BTC's maximum leverage at 40x, it can withstand a maximum liquidation risk of 2.4 billion dollars. From this perspective, it seems that very few users have the strength to match this. In the face of ordinary market orders, it only requires market counterparts to smooth out.

Looking back at the entire event, we can see that this whale may have conducted multiple tests before executing this operation. Zhu Su, co-founder of Three Arrows Capital, speculated that the reason this address could take such a large risk was that it was simultaneously shorting on Binance. This was equivalent to a hedged order status, and it was precisely because it discovered that Hyperliquid's mechanism during liquidation was different from that of centralized exchanges that it chose to proceed.

In fact, this operational method is not some miraculous innovation. As mentioned at the beginning, Livermore had inadvertently achieved a similar effect over a hundred years ago. However, at that time, Livermore chose to go long and actively close positions for the survival of the market. In today's market, exchanges cover such phenomena, allowing users to profit at the expense of exchanges. However, the space for such operational methods is likely to close once again, making it difficult for similar platforms to achieve comparable effects in the future.

For exchanges, this is yet another case of paying for lessons learned. For retail investors, such operations are merely fleeting moments, an individual phenomenon of discovering loopholes for profit, lacking replicable operational significance. It is just a topic of conversation in the midst of a dull market.