Howdy!

It’s a fun day having my X feed covered with cute little characters. Bonus points to whoever is first to Studio Ghibli-ify this newsletter.

Today, we’ve got the Hyperliquid JELLYJELLY drama, Solana stablecoins, and a new infrastructure shop named Raiku:

Midweek markets update: Hyperliquid havoc

For a moment there, it really looked like Solana prices might hold. We saw a strong weekend rally, with SOL tapping $146 on Monday — its highest since the local top in early March, for what it's worth — before retreating slightly on Tuesday.

But as of this afternoon, the price has fallen sharply to $137.

I think it’s fair to speculate that this drop was triggered (at least partially) by one of the year's more chaotic memecoin events. It began when a trader opened a massive $6 million short position on JELLYJELLY — a thinly traded token tied to the Jelly-My-Jelly video app, created by Venmo co-founder Iqram Magdon-Ismail and investor Sam Lessin. The trader then deliberately pumped JELLYJELLY’s onchain price, forcing their own liquidation on Hyperliquid, the onchain perp DEX.

The short was absorbed by Hyperliquid's Vault, a communal risk pool backed by the HLP token that inherits positions when users fail to cover margin. As the price kept pumping, though, the vault began to bleed out and eventually was left sitting on an unrealized loss of over $10.5m. Damage control in full effect, Hyperliquid delisted JELLYJELLY, pulled its chart, and hid the vault's exposure from public view. That transparency pivot — coming from a platform often celebrated for onchain clarity — obviously spooked traders.

If JELLYJELLY had hit $0.15374, the vault would have lost its entire $230m reserve, according to onchain analytics cited by Wu Blockchain and others tracking the position in real time. Binance and OKX went full chaos mode, listing 25x leveraged JELLYJELLY perpetuals. However, historical data now shows the short was settled at $0.0095 — before Binance's listing went live — allowing the vault to close the position in profit with a reported 24-hour PnL of approximately $700k USDC.

According to Hyperliquid, the validator set convened and voted to delist JELLYJELLY perps following signs of suspicious market activity. In the hours since, the protocol has stated that the Hyper Foundation will make all non-flagged users whole, with reimbursements processed automatically based on onchain data.

Seasoned market watchers seem to be feeling a bit of déjà vu. 

"Feels like when Avi was still prowling the books," wrote Jito Foundation’s Andrew Thurman, referencing the infamous Avi Eisenberg squeezes that rocked lending platforms in 2022. "Now every perps DEX flicking through their tickers are like, 'I listed a murdered squirrel? Is that...safe?'"

Who's to say if the price drop from $145 to $137 was directly tied to JELLYJELLY, but the sheer velocity of the squeeze — and fears of broader liquidation risk — clearly rattled traders. Sentiment turned risk off almost instantly. Still, there's a path forward. Solana fundamentals remain strong: daily active wallets, DEX volume and DePIN usage continue to trend up.

With any luck, the dip may be short-lived. Let's just cool it on the drama for the rest of the week, yeah?

— Jeff Albus

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Solana is approaching a new all-time high in stablecoins:

The network currently holds around $12.1 billion in stables, by Blockworks Research’s count. Donald Trump’s memecoin, which was paired with USDC, drove a stablecoin supply spike in January.

Since then, Solana’s stablecoin supply growth has been driven more by Tether’s USDT. Nearly $400 million USDT were minted on Solana on March 17.

— Jack Kubinec

Yesterday, a new Solana infrastructure shop named Raiku made its public debut. The so-called coordination layer for Solana — currently in testnet — will focus on helping transactions make it to the blockchain more reliably.

Raiku says its tech will offer Solana validators and app developers guaranteed transaction inclusion as well as inclusion signals that let users and apps know that transactions will make it to the blockchain ahead of time. This could mitigate some of the inherent uncertainty on Solana, where bots spam the blockchain in hopes of maximizing their chances of transaction inclusion. Institutions may be wary of using a blockchain where transaction inclusion is not guaranteed, so Raiku could make Solana more attractive to them.

Raiku is also building out a marketplace for Solana slots, which are the 400ms periods where validators can build a block, and request-for-quote liquidity.

— Jack Kubinec

A message from Ryan Connor, head of research at Blockworks Research: