Papertrade responds to allegations of price manipulation and protocol vulnerabilities: The issue arises from loose position limits during its initial launch phase, and parameters have already begun to be tightened.

Papertrade’s official response to allegations of price manipulation exploits and critical protocol vulnerabilities states that it has never been feasible to grant equal priority to small and large orders. Doing so would lead to front-end congestion from spam transactions—a far worse outcome than the current queuing mechanism. Against these constraints, the team has designed the fair launch to be as inclusive as possible. Last night’s manipulation attempt targeting the BTC/ETH pair on Hyperliquid’s Best Bid Offer (BBO) was not a flaw in the six-month-developed mechanism. Such scenarios were already accounted for; the incident only occurred because position limits were set very loosely during the early launch phase to mitigate congestion. Had position limits been imposed during peak queuing demand, it would have only exacerbated slow user experiences. The queuing mechanism itself, due to uncertainty in entry/exit confirmation times, actually provides natural protection against manipulation. As congestion eases, the team has begun tightening position limits at both on-chain and relay levels. In such a system, manipulation attacks are always possible—the key is whether such attempts are economically viable. The official goal is to set parameters such that manipulation is almost never profitable. Even if successful, tail risks are extremely high, and the expected value is negative.