The decentralized derivatives market has once again been shaken by a major incident, as the POPCAT token was reportedly manipulated, causing Hyperliquid to absorb losses of up to $4.9 million.

The attack occurred amid increasingly thin liquidity across meme tokens, creating ideal conditions for price manipulation - especially on high-leverage derivatives platforms where market depth is limited.

According to on-chain data, this operation has been described as “peak degen warfare,” with the attacker willingly burning millions of dollars just to trigger a liquidation cascade that harmed both the exchange and its users.

Hyperliquid Suffers $4.9 Million Loss After POPCAT Manipulation

Hyperliquid, a decentralized perpetual futures platform, was forced to absorb a $4.9 million loss after a series of coordinated trades targeting the POPCAT token.

Blockchain analysis shows that the attacker withdrew 3 million USDC from OKX and distributed the funds across 19 separate wallets to create a complex trading pattern and avoid suspicion. From there, the attacker built an enormous leveraged long position valued between $20 million and $30 million.

Manipulation Strategy: Pump, Pull and Trigger Mass Liquidations

The attacker executed a carefully planned three-step strategy:

1. Artificially pumping POPCAT with massive buy orders

A $20 million buy order was placed around the $0.21 level, absorbing POPCAT’s thin liquidity and pushing the price upward within a short period.

This created the illusion of real market demand and attracted additional trading volume.

2. Abrupt withdrawal of all buy orders

Once the price had risen sufficiently and the leveraged position reached the desired level, the attacker suddenly removed all pending buy orders.

The disappearance of these buy orders created a liquidity vacuum, causing an immediate and sharp price drop.

3. Triggering a liquidation cascade

The sharp decline instantly liquidated a large number of leveraged positions - not only those belonging to other traders, but also the attacker’s own positions.

All $3 million in the attacker’s collateral was wiped out within seconds.

Despite losing their initial capital, the attacker’s strategy inflicted much heavier damage on the exchange.

HLP Forced to Absorb the Bad Debt

On Hyperliquid, the HLP (Hyperliquid Liquidity Pool) - a community-owned liquidity vault - acts as the final safeguard during liquidations.

During the POPCAT incident, once the attacker’s collateral was completely exhausted, HLP had to absorb all remaining losses, resulting in $4.9 million in bad debt.

This directly affected the profits of LP participants and increased long-term risk exposure for the platform.

Many traders pointed out that the event highlights a simple formula:

Thin liquidity + high leverage = a perfect environment for price attacks.

One community member described the incident as follows: “Someone burned $3 million just to blow up liquidity and push HLP into a $5 million loss. A classic case of manufactured demand followed by a brutal flush.”

Key Lessons for Decentralized Derivatives Markets

The POPCAT incident raises renewed concerns about the safety of thin-liquidity tokens when traded with high leverage. Several takeaways stand out:

Thin liquidity remains a critical vulnerability
High leverage can turn small price movements into liquidation disasters
Automated liquidity vaults can become targets for exploitation
Meme tokens, lacking deep market support, are particularly easy to manipulate

While this is not the first time a meme token has caused significant damage, the incident underscores that risks in decentralized derivatives trading remain high without stronger risk controls.

Conclusion

The POPCAT event marks one of the most severe market manipulation cases on Hyperliquid in recent months.

With $4.9 million in bad debt, the incident not only delivered a major financial blow but also raised concerns about the vulnerability of thin-liquidity tokens.

ChainXmedia will continue monitoring this story and provide further updates as new developments emerge.