Papertrade, a newly launched perpetuals decentralized exchange built on Hyperliquid, experienced a dramatic reversal after its debut weekend. The platform's open interest collapsed by 93.7%, falling from $11 billion to $693 million over roughly 24 hours.
The exchange also saw significant capital outflows, with total value locked declining from $118 million to $70 million during the same period—a loss of $48 million in deposits. By the end of the reporting period, TVL had dropped further to $67 million.
Transaction Prioritization and Manipulation Attempts
Following its first full day of trading, Papertrade addressed user complaints about platform operations. Some traders expressed frustration that smaller transactions were not given the same priority as larger orders.
Papertrade defended the approach, stating that processing all transactions equally would allow thousands of minuscule orders to overwhelm the system and worsen processing delays.
The exchange also acknowledged attempts by certain traders to manipulate bitcoin and ethereum prices. According to Papertrade's statement, some participants sought to exploit pricing data from Hyperliquid, which the platform uses to calculate trading position values through the best bid and offer mechanism—reflecting the highest price buyers will pay and the lowest price sellers will accept.
Sustainability Questions Ahead
Papertrade maintained that such manipulation attacks were anticipated and accounted for during six months of infrastructure development. Despite the sharp decline in activity over the weekend, the exchange contends its system was designed to handle these challenges.
The platform now faces the broader question of whether it can maintain trader interest beyond its volatile launch period, as the initial excitement appears to have faded significantly.
