Two trading accounts on the decentralized exchange Hyperliquid placed over $170 million in oil perpetual contract orders, only to repeatedly cancel them. Findings from compliance firm Solidus Labs, alongside data from Lookonchain, show that the activity took place between March 8 and March 10 amid volatility in energy markets. Through a pattern suspected of being spoofing, the two accounts reportedly netted roughly $119,000, or around IDR 1.87 billion, over a three-day period.
What brought this maneuver into the spotlight was not just the market value involved, but the stark disparity between displayed orders and those actually executed.
30-Fold Cancellation Ratio
The pattern executed by the two accounts relied on order book manipulation. The perpetrators placed large orders on one side of the market, repeatedly canceling them before counterparties could fill them. At the same time, their orders on the opposite side were successfully executed.
Solidus Labs noted that the value of canceled orders was approximately 30 times higher than the volume of actual filled orders. On March 9, for instance, one of the accounts canceled roughly $17 million in sell orders. Concurrently with that withdrawal, the same account executed real purchases worth $425,000.
The U.S. Commodity Futures Trading Commission (CFTC) has strictly prohibited spoofing since issuing guidance in 2013. The rule defines spoofing as the practice of bidding or offering with the intent to cancel before execution, aiming to manipulate perceptions of market liquidity.
Deployer Responsibilities and Slashing Rules
Hyperliquid Labs stated that all transactions, order cancellations, and trader positions are transparently recorded on the blockchain. Because it operates onchain, market data remains open to scrutiny by both the public and regulators.
According to Hyperliquid documentation, HIP-3 markets are managed by independent deployers. These deployers hold the authority to set leverage parameters, price oracles, and risk limits, as well as halt trading and settle open positions if irregularities are detected.
Beyond deployer authority, the Hyperliquid protocol includes HYPE token slashing penalties. This punishment is designed for validators and deployers who allow market manipulation or compromise system integrity.
For decentralized exchange market participants, onchain order book transparency certainly makes tracking transactions easier, but strict oversight of risk parameters by deployers remains crucial to prevent liquidity from being exploited.
Sourced from crypto.news.
Also read: What Is DeFi (Decentralized Finance)?
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Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
