JELLY’s Short Squeeze Crashes HYPE by 14%—Is Hyperliquid Still a Safe Bet?

Hyperliquid (HYPE) is experiencing intense selling pressure after a massive short squeeze on the JELLY meme coin sparked concerns among traders. A whale-driven price surge resulted in nearly $12 million in losses for Hyperliquidity Provider (HLP), prompting the exchange to remove JELLY from its platform.

In response, investor confidence took a sharp downturn, leading to a 14% drop in HYPE’s value over the last 24 hours. With its market capitalization now slipping below $5 billion, the question remains—will HYPE’s decline continue?

Hyperliquid Faces Turmoil as JELLY Delisting Shakes Market

Hyperliquid is facing heightened scrutiny after a whale with 124.6 million JELLY manipulated the token’s price, exploiting Hyperliquidity Provider (HLP) for massive gains.

The whale initially dumped its holdings, crashing JELLY’s price and forcing Hyperliquid into a substantial passive short position. Then, by rebuying and pumping the price back up, the whale inflicted nearly $12 million in losses on Hyperliquid.

The incident raised serious concerns about Hyperliquid’s risk management and security protocols. To mitigate further damage, the platform swiftly delisted JELLYJELLY, a move aimed at preventing what could have escalated into a staggering $230 million loss.

Despite the action, investor confidence took a heavy blow. HYPE’s price tumbled over 10% in the last 24 hours, dragging its market cap below $5 billion as traders worry about future vulnerabilities and potential repeat exploits.

HYPE Indicators Reflect Market Fallout

HYPE’s Relative Strength Index (RSI) has plummeted to 36.27, a sharp decline from 71 just two days prior. This dramatic shift highlights the rapid loss of momentum following the exploit news, which erased recent recovery efforts and sent prices lower.

Source: Trading View

The RSI, which gauges price momentum on a scale from 0 to 100, typically signals overbought conditions above 70 and oversold territory below 30. Readings between 30 and 50 indicate bearish pressure. At 36.27, HYPE is nearing oversold levels, suggesting sellers have taken control. While not yet in extreme territory, the weakness signals potential for further downside unless sentiment improves.

Meanwhile, HYPE’s BBTrend indicator has dropped from 10 to 6.97 since the exploit but has remained positive for six consecutive days. BBTrend, which tracks trend strength based on Bollinger Band expansion, reflects market momentum. Values above 3 indicate strong trends, while readings below 1 suggest consolidation. The drop from 10 to below 7 suggests weakening momentum, though the trend remains intact.

Source: Trading View

If BBTrend continues to decline, it could confirm a slowdown in bullish momentum. Paired with a low RSI, this scenario may keep HYPE under selling pressure unless a significant reversal occurs.

Can Hyperliquid Rebound from the Sell-Off?

If the current downtrend persists, HYPE is on track to test the critical support level at $13.91. Technical indicators suggest a potential death cross formation, where the short-term moving average crosses below the long-term moving average, signalling further downside risk.

A breakdown below $13.91 could trigger additional selling pressure, with the next key support levels at $12.82 and $12.06. Falling below these zones may accelerate the bearish momentum, deepening the decline.

However, if HYPE manages to regain market confidence, it could make another attempt at the $17.03 resistance. Just three days ago, the token struggled to break above this level but failed.

A successful breakout above $17.03, supported by strong momentum, could pave the way for a rally toward $21 and possibly $25.87. If this happens, it would mark HYPE’s first time trading above $24 since February 22.