Hyperliquid (HYPE) Price Fluctuations: Changing Market Sentiment During DeFi Liquidity Developments

The decentralized finance (DeFi) industry has consistently faced the challenge of balancing rapid innovation with inherent instability. Hyperliquid (HYPE), a prominent decentralized perpetuals platform, has emerged as a key example for examining how abrupt liquidity disruptions and market manipulation can intensify price swings. Throughout 2025, HYPE's token experienced significant volatility, fueled by a series of notable incidents that revealed weaknesses in both the protocol's structure and market sentiment. This article explores the relationship between liquidity shocks, trader actions, and shifts in sentiment, providing guidance for investors navigating these unpredictable conditions.

The November 2025 POPCAT Incident: Spoofing and Leverage in Action

In November 2025, Hyperliquid encountered its third significant liquidity event of the year when a coordinated attack targeted the Solana-based

POPCAT, resulting in a wave of forced liquidations. , the attacker withdrew $3 million in from OKX, spread the funds across several wallets, and used leveraged trades on Hyperliquid to manipulate prices. By placing a substantial buy wall at $0.21 and then removing it, the attacker caused POPCAT's price to plummet by 30%. for HLP liquidity providers, who were left vulnerable to abrupt market changes.

This event highlighted a major vulnerability in markets with high leverage and limited liquidity: bad actors can exploit thin order books and community-backed liquidation pools. Unlike typical hacks, this manipulation relied on precise timing and spoofing tactics, illustrating the tension between DeFi's decentralized ideals and its dependence on fragile systems.

after the attack further raised doubts about its operational strength, with critics questioning if the platform's semi-centralized setup could endure repeated attacks.

The July 2025 API Failure: Infrastructure Weakness and Market Trust

Just a month prior, Hyperliquid faced a different setback. On July 29, 2025,

prevented users from trading during a period of intense volatility. At that moment, the platform managed $14.7 billion in open interest and had over 500,000 active participants. rather than a security issue, led to a 2–5% dip in HYPE's price as traders responded to the instability.

Although Hyperliquid's technical team quickly restored operations, the incident reignited concerns about the dangers of relying on centralized front-end infrastructure in DeFi.

, the outage showed how dependence on web APIs can create critical vulnerabilities, even for protocols designed to be decentralized. For investors, this served as a clear warning that technological reliability is just as vital as financial innovation for maintaining confidence.

Market Psychology: TVL, Whale Activity, and Cognitive Biases

Despite these setbacks, Hyperliquid's DeFi Total Value Locked (TVL) climbed to $2.15 billion by late 2025,

among market participants. This TVL growth, , points to increasing long positions and heightened retail interest. However, the picture is complicated by the actions of large holders in mid-cap tokens such as and , where occurred during late morning and midday UTC. These whales, typically using an average leverage of 6.9×, often favor short positions on , in line with broader economic trends.

Psychological dynamics further intensify market swings. For example, anchoring bias causes whales to concentrate trades at certain price points, while the pursuit of high-risk rewards under leverage leads to bold trading during turbulent times. Analysts need to interpret these patterns carefully, as they can distort underlying market signals and mislead retail traders.

Takeaways for Investors: Managing Risk and Building Resilience

The recent volatility on Hyperliquid provides important insights for DeFi participants. First, liquidity disruptions—whether from manipulation or technical failures—can quickly undermine trust, even in platforms with substantial TVL. Second, volatility driven by large traders highlights the need to track on-chain movements and leverage levels. Lastly, how the platform addresses crises, such as

, will play a crucial role in regaining user confidence.

For HYPE, future success depends on tackling systemic vulnerabilities. Strengthening API reliability, improving detection of spoofing, and expanding liquidity pools could help prevent similar incidents. Still, investors should remain cautious about the DeFi sector's ongoing exposure to manipulation, especially in markets where retail enthusiasm exceeds institutional safeguards.