From crypto whale James Wynn to market manipulation, unravelling the opportunities and concerns of on-chain contract Hyperliquid

Written by Lawrence, Mars Finance

Hyperliquid: The new overlord of on-chain liquidity

In May 2025, the crypto market ushered in a new round of market breakouts, with Bitcoin breaking through the $110,000 mark and Ethereum standing at $2,600.

On May 26, Hyperliquid officially announced that its open interest reached $10.1 billion, 24-hour fee income reached $5.6 million, and USDC lock-up exceeded $3.5 billion, all three of which reached record highs.

This achievement not only marks Hyperliquid's emergence as the traffic centre of on-chain contracts beyond traditional CEXs (such as Binance and Bybit), but also reveals a new trend: crypto whales are moving the battlefield from centralised exchanges to on-chain, and Hyperliquid has become their "hunting ground".

Looking at the data, Hyperliquid's rise is not accidental. Its average daily trading volume accounts for more than 70%, and the 7-day trading volume has increased by 46%, far exceeding similar platforms.

Behind this phenomenon is the extreme pursuit of high leverage, low fees and transparency by giant whales. Take James Wynn, a well-known trader, for example, who recently opened a long position of $568 million in bitcoin on Hyperliquid with 40x leverage, which directly pushed the BTC price above the psychological barrier of $100,000, which is almost impossible to achieve in traditional CEXs. Hyperliquid's "on-chain CEX" feature – a combination of decentralised transparency and centralised leverage – makes it an excellent arena for whale games.

Whale hunting logic: from position game to market sentiment manipulation

In the Hyperliquid ecosystem, the profit model of Giant Whale has evolved beyond simple long and short trading, and has evolved into a combination of "attention economy" and "psychological warfare".

Taking James Wynn as an example, his trading strategy presents three characteristics: high leverage (40 times), large positions (hundreds of millions of dollars), and open orders. By taking open positions, he not only attracts follow-up funds to push up the price of the underlying asset, but also amplifies market sentiment through social media, forming a positive feedback loop of "position-sentiment-price". For example, its continued shouting of "$100,000 is still undervalued" for bitcoin directly led to a large number of retail investors following the trend and further consolidating the bullish trend.

This strategy is not an isolated case. Previously, another Hyperliquid whale @qwatio had made a precise bet on the Federal Reserve's interest rate decision with 50 times leverage, making a profit of more than $9 million in a single day.

Although on-chain detective ZachXBT revealed that his real identity is British fraudster William Parker, this has not diminished its market presence. Such cases reveal a harsh reality: in the on-chain contract market, the "legitimacy" and "profitability" of whales are often decoupled, and the market is more focused on the outcome than the means.

What is even more alarming is that the on-chain operation of giant whales has derived new market manipulation methods. For example, by withdrawing unrealised profits to reduce margin, the platform's liquidation mechanism can be induced to take over the position, thereby transferring the risk to a liquidity pool (such as HLP Vault). In the March 2025 Hyperliquid liquidation event, a giant whale made a profit of $1.86 million through this method, while the platform's liquidity pool lost $4 million. This "in-rule arbitrage" exposed risk management loopholes in on-chain contracts, and also forced Hyperliquid to urgently reduce leverage (BTC to 40x, ETH to 25x) and improve the margin system.

Meme Coins and Leverage: The "Double-edged Sword" of Giant Whales

In the Hyperliquid ecosystem, the combination of meme coins and high-leverage contracts has become another powerful tool for whales to harvest liquidity. James Wynn's rise is closely related to the meme coin: in 2023, he bet on PEPE with a stake of $7,000 and ended up making a profit of more than $25 million;

In 2025, 389.18 billion PEPE will be transferred to Binance from its associated address, causing price volatility again. The core of this "Meme + leverage" model is to use on-chain transparency to create FOMO sentiment, and then amplify returns through high leverage.

Recently, a meme coin called moonpig has become a typical example of this model. On May 22, moonpig's market capitalisation skyrocketed from $30 million to $100 million, a more than threefold increase, driven by James Wynn's open-card call. However, when the price plummeted by 30% in a short period of time, the market accused him of "pulling and selling", and although he denied and hinted that he would withdraw from the contract market, his subsequent deposit of 4 million USDC to increase his position in Bitcoin once again confirmed the whale's manipulation of market sentiment.

The essence of such operations is to combine the volatility of meme coins with the explosive power of leverage to form short-term profiteering opportunities, but at the cost of increasing market vulnerability.

Notably, Hyperliquid's low fees and high liquidity further amplify this risk. Taking March data as an example, the absolute value of its BTC and ETH funding rates is much lower than that of Binance and Bybit, and the average daily liquidation amount reaches $400 million, far exceeding that of traditional platforms.

This environment has attracted a large number of "gambler-type" whales, such as a user who went long ETH with 50x leverage, and made a profit of $6.8 million in a single day under Trump's favourable policies, and was only $22 away from the liquidation price when he opened his position. This kind of operation of "licking blood at the tip of the knife" pushes the on-chain contract to the extreme of speculation and risk.

Controversy and Reflection: The Compliance Dilemma of On-Chain Contracts

Behind the boom in Hyperliquid lies the inherent contradiction of decentralised finance (DeFi): the symbiosis of transparency and manipulation. On the one hand, the openness of on-chain data makes the whale position hidden, and retail investors can use it to track the movement of "smart money". On the other hand, the giant whale uses this transparency to manipulate the market in reverse, forming a deformed ecology of "open-card game". Trader Eugene sharply criticised: "Disclosure of hyperscale positions can do more harm than good, and the negative externalities far outweigh the positives."

This contradiction is even more pronounced at the regulatory level. Traditional CEXs can inhibit manipulation through dynamic risk limits, position size control, etc., such as limiting the leverage of large positions to 1.5x.

However, as a DEX (decentralised exchange), Hyperliquid needs to balance "permissionless" and "risk control". Despite the introduction of margin improvements (e.g., liquidation losses of more than 18.3%), Whale can still circumvent restrictions by diversifying positions across multiple accounts3. This "cat-and-mouse game" reflects the governance dilemma of DeFi: how to prevent systemic risk while maintaining the principle of decentralisation?

The community is clearly divided. Some advocate the introduction of CEX-style risk control, such as adjusting margin according to the position size ladder; Others argue that this goes against the spirit of DeFi and that the real solution should be to attract more market makers to increase liquidity and naturally raise the cost of manipulation. Hyperliquid's choice favours the latter, and its recent move to introduce professional market makers and expand its on-chain asset class may be key to future ecosystem robustness.

Future Prospects: Opportunities and Challenges of Onchain Summer

The rise of Hyperliquid marks the beginning of a new phase of the "Onchain Summer" in the crypto market. As CEXs such as Binance and OKX embrace the on-chain ecosystem through the Wallet function, and traditional institutions enter the market through ETFs, the liquidity barriers of on-chain contracts are gradually being broken. Hyperliquid has become the biggest beneficiary of this trend with its positioning of "high-performance L1 public chain + on-chain CEX experience".

However, can the whale-dominated ecosystem be sustainable? The answer depends on three variables:

• Regulatory pressure: If countries include on-chain contracts in their derivatives regulatory frameworks, Hyperliquid may face compliance requirements such as KYC and leverage caps, which may weaken its competitive advantage.

• Technology iteration: At present, Hyperliquid's TPS (transactions per second) still lags behind public chains such as Solana, and if the performance cannot be improved, the large transactions of giant whales may cause network congestion and slippage.

• Retail Investor Engagement: With only 390,000 users and a limited number of spot trading options, the platform will become a "whale playground" if it fails to attract more retail investors to hedge against whale volatility.

For investors, Hyperliquid is both a land of opportunity and a minefield of risk. Following whales requires beware of "survivorship bias" – James Wynn's success has overshadowed the tragedy of countless liquidators; Blindly copying a high-leverage strategy is more likely to become the "fuel" for whale harvesting. Only by establishing an independent analytical framework can we navigate the turbulent waters of on-chain contracts.