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Bybit CEO: The challenges faced by Hyperliquid are also present on CEX, but CEX has more robust risk management measures

2025.03.13 14:16:35

On March 13th, Ben Zhou, the co-founder and CEO of Bybit, posted on social media to discuss his views on the "Whale ETH Position Liquidation on Hyperliquid", stating: "This ultimately led to a discussion about leverage, DEXs, and CEXs providing low or high leverage capabilities. Essentially, what occurred was that a whale used Hyperliquid's liquidation engine to exit the position. In the case of large funds combined with high leverage, it is difficult to exit quickly. Market orders will have significant slippage. And trying to raise the liquidation price by extracting unrealized profits to trigger liquidation and allowing Hyperliquid to take over the entire position at the liquidation price can facilitate a smooth exit. The one that suffered losses was Hyperliquid. In this situation, both CEXs and DEXs face the same challenge. Bybit's liquidation engine will also take over the entire position when a whale is liquidated. Currently, Hyperliquid has reduced the overall leverage, which is one approach, perhaps the most effective one, but it will damage the business as users want to trade with higher leverage. Additionally, Hyperliquid could consider deploying tools like dynamic risk limit mechanisms: as the position grows, the overall leverage decreases based on the position size. In a CEX, the whale's position size would be reduced to about 1.5x. However, if users use multiple accounts (without KYC and with a very low account opening cost) to achieve the same goal, this will not solve the problem. So, this raises the question of whether DEXs really want to maintain high leverage in the long term and avoid this issue. They may need to deploy many CEX-level risk management measures, such as market surveillance to detect abusers and market manipulators, OI limits to control overall OI, and so on. Even though Hyperliquid has currently reduced leverage (BTC to 40x, ETH to 25x), it can still be exploited."
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