XPL Flash Crash Review: 16 Related Wallets Withdraw Collateral, HLP Loses $550,000

on November 2, filo, a team member at liquidity provider Quote Markets and a former JPMorgan employee, published a post analyzing the XPL flash crash on Hyperliquid on November 1. At 12:32 Beijing Time, XPL dropped 18% within one minute, while BTC fell by only 0.04% during the same period. The liquidation vault under HLP passively absorbed approximately $12.18 million in XPL longs within 10 seconds, unwinding the positions after 75 minutes and incurring a loss of roughly $556,000.

Analysis indicates that 14 of the 16 related wallets can be traced to four USDC funding chains on Arbitrum, with their order timing aligning precisely with the trades. These wallets collectively held approximately 269 million XPL longs, valued at around $23.09 million. Each individual wallet's position was kept below the $3 million threshold associated with higher margin requirement tiers.

In the roughly 8 minutes before the crash, 12 of these wallets withdrew a total of approximately $2.04 million in margin, while seven additional withdrawal requests were rejected due to insufficient funds. These 12 wallets accounted for 90.7% of the positions taken over by the liquidation vault.

However, before the first liquidation on Hyperliquid, XPL had already declined by about 6%. Given that trading volume on Binance perpetual contracts was substantially higher and sell-side orders comprised 75.9% of the volume, public data cannot determine who initiated the sell-off. The 16 wallets collectively incurred a loss of approximately $711,000 on Hyperliquid, and it remains unknown whether they hedged on other platforms. As of publication, Hyperliquid has yet to issue a statement regarding the incident.