Hyperliquid Delists Perpetual Futures for JELLY, Drawing Industry Criticism

Decentralised exchange Hyperliquid has sparked criticism over its reaction to a large liquidation on its platform, wherein it opted to remove the perpetual smart contracts for JELLY.

After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps.

All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data. There is no…

— Hyperliquid (@HyperliquidX) March 26, 2025

Why did Hyperliquid Delist JELLY?

A liquidation crisis initiated the move to delist Jelly. For background, March 26, 2025, began well for JELLY. The price increased, following both Binance and OKX launching perpetual future contracts for the token, with JELLY’s market cap reaching  US$25 million (AUS$39.78 million).

However, that same day a trader on Hyperliquid reportedly opened a 20x leveraged US$6 million (AU$9.5 million) short position and then deliberately liquidated their own position by pumping the price of JELLY on-chain. This then forced Hyperliquid to absorb the short position.

Evidently Hyperliquid did not hold enough JELLY supply, and after an initial price plunge, a short squeeze began to ensue. 

Related: BlackRock’s Crypto Fund BUIDL Reaches $1.7B, Welcomes Solana to its Growing Portfolio

The Public Response

There has been wide-spread criticism regarding both the response from Hyperliquid to delist JELLY, as well as how Hyperliquid’s processes and structure enabled such an event to occur in the first place. 

Criticism stems from reputable figures, this includes an X post by Gracy Chen, CEO of Bitget, where she compared Hyperliquid to collapsed exchange FTX:

Other prominent figures such as Arthur Hayes, acknowledged the failings of Hyperliquid in its consideration as a decentralised platform, but conveyed a viewpoint that the rest of the incident is essentially just noise given the platform’s overall success:

$HYPE can’t handle the $JELLY

Let’s stop pretending hyperliquid is decentralised

And then stop pretending traders actually give a fuck

Bet you $HYPE is back where is started in short order cause degens gonna degen

— Arthur Hayes (@CryptoHayes) March 26, 2025

Further Context

Hyperliquid validators deciding to delist JELLY meant that US$3.7 million (AUS$5.88 million) in JELLY positions were settled at a price of US$0.0095 (AUS$0.015) per token. Hyperliquid has stated that it will make the affected users whole again.

Concern has also been raised about Hyperliquid only holding four validators. Validators aid in reducing the risk of insiders manipulating trades on the blockchain. 

It is noteworthy that Solana holds approximately 1000 validators, whereas Ethereum has approximately 1 million validators. 

Related: Fidelity Makes Bold Move into Solana Ecosystem, Files Official ETF Application with SEC