TheBlock
A trader made about $1.28 million on Papertrade within hours of its Saturday launch by moving ETH prices on Hyperliquid, according to trading data and Papertrade records. Papertrade offers up to 1,000x leverage, prices trades at Hyperliquid's best-bid and offer midpoint, and takes the opposite side through a shared USDC pool. The trader's wallet posted $3.18 billion in Papertrade volume and withdrew about $2.48 million against $1.2 million in deposits.
Why it matters
The setup created a direct link between high-leverage positions on Papertrade and spot-like trading on Hyperliquid. The wallet repeatedly opened large Papertrade positions, then bought or sold thousands of ETH on Hyperliquid to move the reference price before closing. At 1,000x leverage, a 0.1% price move equals the full margin on a position.
The wallet traded about $231 million of ETH on Hyperliquid during Saturday evening and paid roughly $52,000 in fees. In one sequence, it bought about 6,060 ETH as the price rose roughly $3, then sold about 5,210 ETH as the price fell around $3.50. Papertrade said launch-period open-interest caps were set loosely and that it was tightening them onchain and at the relayer level.
Market impact
The incident puts Papertrade's shared USDC pool and PAPER reward design under pressure. Papertrade said the pool held $5 million, while a chart showed its balance falling from about $5 million to roughly $2.4 million before recovering. The protocol also said it had paid $25 million to PAPER stakers.
The wallet later opened 30 ETH shorts at 660x leverage with a combined notional value of $297 million. Those positions were liquidated for a reported $450,000 loss, minting about 17.6 million PAPER. The episode leaves open questions about position caps, oracle design and how high-leverage venues manage launch demand.
Frequently asked questions
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How did the Papertrade trader generate the reported $1.28M profit?
The wallet opened large positions on Papertrade, then bought or sold thousands of ETH on Hyperliquid to move the reference price before closing those positions.
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Why was 1,000x leverage important to the trades?
At 1,000x leverage, a 0.1% price move equals the full margin on a position, making small changes in the Hyperliquid reference price financially significant.
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What happened to Papertrade's shared USDC pool?
Papertrade said the pool held $5 million, while a chart showed its balance falling to about $2.4 million before recovering.
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What changes did Papertrade announce after the incident?
Papertrade said it was tightening open-interest caps both onchain and at the relayer level after setting them loosely to handle launch demand.
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What happened to the trader's later ETH short positions?
The wallet opened 30 ETH shorts at 660x leverage with a combined notional value of $297 million. The positions were liquidated for a reported $450,000 loss, minting about 17.6 million PAPER.
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