The native token for the Hyperliquid decentralized exchange (DEX), HYPE (+1.58%), has seen its value erode after a series of security incidents and controversial network interventions highlighted risks in its highly centralized structure. The platform, which has only 30 validators, is under scrutiny for alleged use by North Korean hackers and for manually intervening in trading activity, according to on-chain analysts and company disclosures.
These events have drawn criticism from many in the crypto community who believe a blockchain’s code should be immutable law. "When a blockchain has few validators, it increases the risk of a small team exerting too much control," one on-chain analyst noted, pointing to the stark contrast with Ethereum’s roughly 900,000 validators.
The concerns stem from two major events. In late 2024, on-chain analysts flagged wallets linked to North Korean hackers allegedly laundering funds through the exchange, causing an 18 percent drop in HYPE’s price. More recently, in March 2025, Hyperliquid validators voted to manually delist the meme coin JELLY and close a large short position to prevent a $13.5 million loss for the platform's liquidity pool, a move that overrode market activity.
The incidents cast a shadow over Hyperliquid's success, which includes perpetual futures volumes approaching $200 billion per month. The lack of know-your-customer (KYC) requirements, while common for DEXs, appears to have made the platform a target for illicit activities, attracting potential regulatory oversight. While Hyperliquid has announced a $29 million investment in a policy center to address regulatory issues, the combination of high centralization and security lapses presents a significant headwind for the token.
This article is for informational purposes only and does not constitute investment advice.
