Hyperliquid Market Operator To Reimburse SK Hynix Perp Liquidation Losses

A perpetual future is a derivative that tracks an asset without an expiry date, and holds no claim on it. SK Hynix, the South Korean memory chipmaker, is listed in Seoul and also trades in New York as an American depositary receipt.

"The oracle system worked as intended according to its specification," the deployer said on X at 00:24UTC on 29 Jul, referring to the feed that brings an outside price onchain. Trade.xyz added that it had decided to cover liquidation losses attributable to the anomaly. It called the move a one-time discretionary decision and not a guarantee of similar future action. Eligibility rules would follow and payments were expected within days.

The company said it would improve its pricing for tail events, revisit its assumptions about external venues, and give more weight to price formation on its own order books.

The oracle's Seoul-sourced input

The market, shown on Hyperliquid as SKHYNIX-USDC, is settled in USDC and deployed under HIP-3 (Hyperliquid Improvement Proposal 3), which lets outside teams run their own markets on the protocol after staking 500k HYPE, worth about $27.5mn at current prices. That stake can be slashed if a market is operated maliciously or incorrectly. Crypto venues began quoting SK Hynix perpetuals ahead of the stock's Nasdaq ADR debut earlier this month. Trade.xyz sets the sources for the market's oracle, the feed that brings an outside price onchain, and allows leverage of up to 10 times.

The drop began with a single share in Seoul.

Nextrade (NXT), the alternative venue that competes with the Korea Exchange for Seoul-listed shares, opens a pre-market session at 08:00 KST, an hour before the main market opens at 09:00 KST. On 28 Jul, one share of SK Hynix changed hands there in that first minute at 1,272,000 won ($868), down 30% from the previous close of 1,816,000 won ($1,240). That was the daily limit, the furthest a Korean stock is allowed to move from its previous close in a session.

Yonhap Infomax reported the trade as an apparent order-entry error. Buying orders returned within about two minutes and the share recovered to around 1,700,000 won ($1,161), well before the main market opened. In Seoul, it was over in two minutes.

Nextrade did not immediately respond to Sandmark's request for comment on the trade.

Seven-second cascade on Hyperliquid

Seconds later, $57.4mn of positions had been closed out.

About four seconds after the session opened, the oracle price, the outside price the market feeds onchain, moved from $1,131.40 to $954.99. Liquidations began roughly 2.7 seconds after that. The figures come from onchain analysis published on X by MarketsAlpha, an account run by Markets, which competes with Trade.xyz in stock perpetuals on Hyperliquid.

The trade had actually executed, Trade.xyz said, and reached its systems through several independent data vendors. The oracle was taking prices from Nextrade at that moment. The mark price, the separate valuation the exchange uses to decide when a leveraged position is closed out, fell from $1,127.90 to $917.25.

An alleged error became a lasting loss. The Seoul price fell 30% from the previous close, the oracle 16% and the mark 19% from where each had been moments earlier. Leveraged long positions are closed out when the mark falls far enough against them, and it fell that far in seconds.

As the mark fell, 960 long accounts were closed out, holding $57.4mn of positions between them, MarketsAlpha estimated. The traders booked about $17.3mn in losses. The gap between the two numbers is the difference between how big the positions were and how far the price moved against them: the first is the full size of the bets, the second is what was actually lost on them.

Trade.xyz runs the market

Traders on the other side lost control of their positions, too. MarketsAlpha's analysis put the same backstop mechanism behind roughly $10.8mn of gains realized across 100 short accounts that had not chosen to close, forced out to balance the book against the liquidated longs.

Trade.xyz has not said how much it expects to pay, and neither it nor Hyperliquid Labs has published a liquidation count.

A Hyperliquid Labs co-founder who uses the pseudonym iliensinc wrote in the protocol's Discord on 28 Jul that the market is operated by Trade.xyz, not by the protocol itself. "HIP-3 deployers push the mark, oracle and external perp price inputs," the post said.

The episode is the latest turn in a dynamic Sandmark explored days earlier: an onchain market that never closes, meeting a session-bound Seoul listing that very much does.