A flash crash of 45% in Hyperliquid's SpaceX contracts led to $1.5 million in liquidations, exposing risks for retail investors ahead of the IPO.
A sudden selloff of a crypto contract linked to SpaceX resulted in a staggering 45% flash crash, liquidating approximately $1.5 million from retail traders in a matter of just 30 minutes.
Market Turmoil Due to Thin Liquidity
On Thursday afternoon, the SPACEX-USDH perpetual contract on Hyperliquid saw its value plummet from $2,277 to a low of $1,254, before partially recovering to around $2,169. This sharp decline liquidated 405 users across 1,393 positions, wiping out a total of $1.51 million in notional value.
The crash highlights the risks faced by investors in this speculative token, especially as it lacks an established public price reference. The contract had recorded minimal trading activity before the crash, with only $4.87 million in volume against an open interest of less than $2.9 million. A single large trade absorbed most of this volume, reflecting the poor liquidity in the market.
Many of the affected retail investors were using leverage, with the average liquidated position showing only $31 in margin, indicating a highly leveraged and vulnerable user base. This incident raises concerns for retail traders as they navigate the speculative nature of the SpaceX contract ahead of the company's anticipated IPO in June.
Unlike traditional perpetual contracts for assets like Bitcoin or Ethereum, which are supported by strong spot markets, the SPACEX contract operates without a public price benchmark, as SpaceX shares are only available in private secondary markets for accredited investors. At the time of settlement, the contract's mark price of $2,132 remained significantly above the oracle price of $1,908, indicating a premium despite the market's volatility.
