Two crypto wallets allegedly exploited synthetic trading platform Papertrade on the HyperEVM network, part of the Hyperliquid ecosystem, through price manipulation tactics. On-chain researcher on X, Boblob (@Dr_bobo54), revealed that both wallets executed ETH transactions worth around $20 million per account on Hyperliquid. The trades shifted ETH’s market price by 10 to 20 basis points, or roughly 0.1% to 0.2%.
While a 0.2% shift in the spot market appears minor, its impact was immediate as both wallets held long positions worth hundreds of millions of dollars on Papertrade at the same time.
The Vulnerability Behind Hyperliquid’s Midpoint
The root of the vulnerability lies in Papertrade’s smart contracts, which reference prices from the midpoint - the middle point between the best bid and best offer on Hyperliquid. This design opened a loophole allowing actors to shift the reference price simply by placing new orders in Hyperliquid’s order book without needing to execute them.
Papertrade itself does not use a conventional order book. The platform operates using a synthetic liquidity pool offering up to 1,000x leverage for Bitcoin and Ethereum pairs. With a thousand-fold multiplier, a 0.1% price swing can boost nine-figure position profits in a matter of seconds.
Papertrade developers had actually documented this midpoint pricing risk in their official disclosure documents. Nevertheless, there has been no confirmation of any technical fix implemented on the platform’s smart contracts before this suspicious activity was publicly reported.
Why Hyperliquid Is Immune to Similar Tricks
Hyperliquid itself does not use such a vulnerable price-reading mechanism. To prevent market manipulation, the main Hyperliquid platform relies on an oracle price that calculates a weighted median from centralized exchanges updated every three seconds. Hyperliquid also implements a more complex mark price, ensuring one-sided orders in the order book cannot sway the liquidation benchmark.
External reference price manipulation is not new to the crypto derivatives sector. In July 2026, SK Hynix equity perpetual contracts on the Trade.xyz platform plunged 17.9% due to abnormal transactions on a South Korean exchange that affected the external reference price. Smart contract reliance on a single external data source once again exposed the same weak spot.
Ongoing Investigation and a Reminder for Traders
Papertrade previously recorded total deposits reaching $85.3 million, as reported by kabarbitcoin.com. To date, no verified losses have been confirmed by developers, and the audit process into the two wallets’ transactions remains underway.
For market participants in the DeFi sector, this incident serves as a reminder that offering high leverage demands commensurate oracle resilience. Committing capital to protocols relying on order book midpoints without mark price safeguards leaves the door open to manipulation risks for anyone with substantial liquidity.
Reported via crypto.news.
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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.
