Market Confidence Shaken as HYPE Drops After JELLY Exploit: Could Recovery Be Possible?

Hyperliquid (HYPE) has recently faced a significant setback, dropping over 10% following a $12 million exploit linked to the JELLY token, shaking investor confidence.

• This incident not only highlighted vulnerabilities in the platform but also sent the RSI plunging to 36.27, indicating bearish sentiment is strong.
• “The delisting of JELLY was essential to avoid further losses,” noted a spokesperson from Hyperliquid, emphasizing the proactive steps taken to safeguard interests.

JELLY Delisting Crashes Hyperliquid Price

Hyperliquid is currently under intense scrutiny following the manipulative price fluctuations of the JELLY token orchestrated by a whale investor controlling 124.6 million tokens.

The whales initial dump of JELLY tokens significantly crashed the price, forcing Hyperliquidity Provider (HLP) into an involuntary short position. In a sudden rebound, the whale repurchased the tokens, leading to a substantial loss of nearly $12 million for HLP.

This exploit has triggered major concerns regarding the platforms exposure to such risks, raising significant questions about its security protocols.

Hyperliquid Provider Losses. Source: Lookonchain on X.

In response to the exploit, Hyperliquid has announced the delisting of the JELLY token to prevent what could have escalated into a $230 million loss. However, the damage to investor confidence has already been significant, resulting in HYPEs price plummeting over 10% in just 24 hours, dropping its market capitalization below $5 billion as the market grapples with fears of potential instability and similar exploits.

HYPE Indicators Show The Impact Of The News

The trading indicators for HYPE have shown a rapid deterioration post-exploit, as evidenced by the RSI dropping to 36.27 from a previous peak of 71 just two days beforehand. This steep decline signals a shift in momentum following the negative sentiment surrounding the platform.

The RSI (Relative Strength Index) serves as a momentum indicator, ranging from 0 to 100. Readings above 70 often indicate overbought conditions, while values under 30 imply an oversold state—levels between 30 and 50 point to bearish pressures.

HYPE RSI. Source: TradingView.

With the RSI hovering around 36.27, HYPE is approaching oversold territory, indicating that sellers are currently dominant in the market. If this trend persists, it could lead to further declines unless a reversal occurs.

Moreover, HYPEs BBTrend indicator has decreased from 10 to 6.97 post-exploit. This indicator, which assesses the strength of price trends based on the variation of Bollinger Bands, still remains above the critical level of 3, suggesting that while momentum is weakening, it has not yet been lost completely.

HYPE BBTrend. Source: TradingView.

Values that drop below 3 can signify weak momentum, hence the decrease in BBTrend may further confirm a slowdown in bullish movements. Coupled with the low RSI, this scenario may keep HYPE under pressure unless positive sentiment resurfaces.

Can Hyperliquid Recover From The Crash？

If negative market conditions persist, HYPE is likely to test the critical support level at $13.91. This potential downturn could be exacerbated by the formation of a death cross, as indicated by the EMA lines that suggest an imminent crossover.

Failure to maintain above the $13.91 mark would likely intensify selling pressures. Subsequent support levels are positioned at $12.82 and $12.06. Breaching these levels could lead to heightened downward momentum for HYPE.

HYPE Price Analysis. Source: TradingView.

Conversely, should HYPE manage to win back positive sentiment, it may look to retest the resistance at $17.03. This level was approached recently, but attempts to break through were unsuccessful.

A successful breakout above $17.03 could set the stage for further rallies towards $21 and potentially $25.87, marking a significant recovery and revitalization for HYPE since its last trading levels above $24 earlier in February.

Conclusion

The series of events surrounding the JELLY exploit has left a lasting impact on Hyperliquid and its token HYPE. As the market digests the fallout, key support and resistance levels will dictate the future price action of HYPE. Investors and traders alike should remain vigilant in observing the evolving landscape to navigate potential volatility cautiously.