HyperLiquid Tightens Security After JELLY Crash

HyperLiquid has responded to the recent JELLY token crisis by refunding affected users and introducing tighter security measures to prevent future problems. The decentralized exchange (DEX) took action after a JELLY short squeeze nearly caused $230 million in losses and raised fears of another FTX-like collapse. While its HYPE token saw a sharp price drop, it has since started to recover, showing renewed community trust.

The platform released a statement saying it would refund users who held long positions in JELLY at the time of settlement—except for certain flagged addresses. The refunds aim to settle all trades at favorable prices for those affected. HyperLiquid also announced key upgrades, including stricter token delisting rules, limits on open interest, and major changes to its liquidation system to prevent similar situations in the future.

Despite these efforts, not everyone is convinced. Many in the crypto world are questioning HyperLiquid’s decisions, asking if the exchange truly operates as a decentralized platform. Critics argue that delisting tokens and freezing funds go against DeFi principles. The exchange’s fast action to protect itself in the JELLY event contrasts sharply with its slower response to past threats, like a potential North Korean hack earlier this year.

Well-known blockchain investigator ZachXBT voiced strong concerns. Months ago, he pointed out suspicious activity linked to a possible North Korean cyber threat. At the time, HyperLiquid claimed it couldn’t act because it was decentralized. Yet, during the JELLY event, it quickly stepped in to shut down trades and manually settle positions.

ZachXBT argued that if HyperLiquid had the power to act so fast during the JELLY situation, it could have done the same in earlier cases to protect users. He said the platform made a “centralized decision” to stop an account that was technically using the system as designed.

The community is now watching to see whether HyperLiquid can balance quick action with the decentralized values it claims to uphold. The platform’s future may depend on whether it can maintain trust while also acting responsibly during crises.

While the HYPE token has rebounded slightly, it remains to be seen if these updates will be enough. The platform avoided disaster for now, but the event has sparked a broader debate about the role of decision-making and transparency in DeFi.