Sonic Labs Co-founder Slams Hyperliquid Leverage Model After JELLY Dump

In Brief:

Andre Cronje criticizes Hyperliquid’s fixed leverage model after a user copied a whale’s 50x leveraged trade and shorted 398M JELLY.

Cronje argues leverage should scale with liquidity and volatility, not a fixed formula.

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A Hyperliquid whale strategy was recently mimicked by another user who shorted 398 million JELLY tokens using 50x leverage. The trade caused losses for the Hyperliquid vault and triggered a debate on risk models in DeFi.

Sonic Labs co-founder Andre Cronje responded critically, posting on X:

“I hate this practice. The position size should not be a fixed function formula of leverage, but should depend on available liquidity and actual volatility.”

Cronje emphasized that in decentralized finance (DeFi), rigid leverage rules are dangerous. He proposed a more dynamic system: allow high leverage on small trades (e.g., 1000x), but restrict leverage on large positions (e.g., 1.2x) to reflect real market risks.

This incident highlights growing concerns about DeFi protocols relying on static leverage structures, especially when vault health and protocol solvency are at stake.

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