POPCAT Faces Major Liquidation Cascade: $5M Bad Debt Shifted to HLP Amid Manipulation Concerns

POPCAT, the Solana-based memecoin, experienced a severe market disruption, as 19 highly leveraged long positions were forcibly liquidated in a coordinated cascade, generating $5 million in bad debt that was transferred to the protocol’s HLP (Hybrid Liquidity Pool).

The incident, widely attributed to large-scale malicious manipulation, triggered a sharp drop in liquidity and heightened community tension, with on-chain data showing LP withdrawals exceeding 60% in under two hours. As of November 13, 2025, this event highlights critical risks in leveraged memecoin trading within decentralized finance, particularly around liquidation clustering, LP stability, and permissioned pool mechanics.

What Happened in the POPCAT Liquidation Event?

The cascade began when POPCAT’s price dipped below key liquidation thresholds, triggering 19 whale accounts holding 100x+ leverage to be wiped out simultaneously. On-chain forensics reveal these positions were opened within a narrow 4-hour window, suggesting coordinated entry followed by a targeted price suppression via large sell orders. The resulting $5 million shortfall—unrecoverable due to insufficient collateral—was absorbed by the HLP, a shared liquidity buffer designed to backstop extreme volatility. This transfer diluted HLP returns for passive providers and froze redemptions temporarily, causing liquidity to plummet 72% from peak levels.

• Liquidated Accounts: 19 wallets, average leverage ~125x.
• Bad Debt: $5M transferred to HLP.
• LP Impact: 60%+ withdrawal in 2 hours; depth fell to $1.2M.
• Trigger: Price drop from $0.042 to $0.031 in 18 minutes.
• Manipulation Signs: High-volume spoof orders at $0.038 support.

Why the POPCAT Incident Matters in 2025 Memecoin Risks

This event matters in 2025 because it exposes systemic vulnerabilities in leveraged memecoin protocols, where HLP mechanics intended as safety nets can instead amplify contagion during manipulation. With memecoin TVL surpassing $12 billion on Solana, such incidents erode confidence in permissionless liquidity and automated risk systems. The community backlash—evident in governance forums calling for leverage caps and circuit breakers—reflects growing demands for anti-manipulation safeguards in high-beta assets. For DeFi participants, it underscores the need for on-chain transparency and real-time monitoring of LP health and permission structures.

• HLP Dilution: Passive LPs absorbed 100% of bad debt.
• Leverage Risk: 100x+ positions enabled cascade failure.
• Liquidity Fragility: Single-event withdrawal crippled depth.
• Community Response: Proposals for 50x leverage cap, 5-minute cooldowns.
• Regulatory Echo: Aligns with calls for memecoin risk disclosures.

How the POPCAT Manipulation and HLP Transfer Worked

The attack exploited leverage clustering and thin order books:

1. Build-Up: 19 accounts entered 100x+ longs at $0.038–$0.040.
2. Suppression: Large sell walls dropped price to $0.031, triggering liquidations.
3. Cascade: Each liquidation sold collateral, pushing price lower, hitting next thresholds.
4. Debt Absorption: $5M unrecovered loss → transferred to HLP.
5. LP Flight: Providers rushed exits, crashing liquidity.

The HLP—a hybrid of user deposits and protocol reserves—automatically socialized the loss, but permissioned withdrawal delays prevented full collapse. On-chain timestamps confirm abnormal LP behavior (e.g., single-wallet 400K POPCAT removal).

• Liquidation Engine: Threshold-based, no delay mechanism.
• HLP Rules: Bad debt → pro-rata deduction from pool yields.
• Permission Flaw: No admin override during cascade.
• Recovery: Protocol injecting 500K USDC to stabilize (pending governance).

Trading Guide and Risk Management Post-Incident

Given the volatility and structural risks, traders should adopt cautious, signal-based strategies:

Aggressive Short-Term Trading

• Entry: Only after KOL discussion volume > 7-day MA and price breaks $0.038 with volume.
• Position: Small long; scale in 20% increments.
• Stop-Loss: Below $0.031 (prior liquidation zone).
• Exit Triggers:
  • Abnormal LP behavior (sudden depth drop >30%).
  • Permission changes in HLP contracts.
  • Price fails to hold $0.038 on retest.

Stable Spot Strategy

• Buy Level: $0.0388 (prior resistance turned support).
• Take-Profit: $0.0505 (next Fibonacci level).
• Stop-Loss: Daily close below $0.0300.
• Avoid: Leveraged contracts, adding to positions.

Observational Levels

• Pullback Support: $0.0380 – watch for bounce or breakdown.
• Upside Target: $0.0550 – hedge or close if reached.
• Extreme Bull Case: $0.1000 – unlikely without new catalyst.
• Short Opportunities: Sell rallies to $0.0480 or $0.0320 support.
• Core Rule: Exit immediately if HLP depth falls below $2M or unusual contract upgrades appear.

Future Implications and Protocol Fixes

The incident has sparked urgent governance proposals:

• Leverage Cap: Reduce max from 125x to 50x.
• Circuit Breakers: 5-minute halt on >20% price move.
• HLP Insurance: Dedicate 10% of fees to bad debt buffer.
• Transparency Dashboard: Real-time LP health, leverage distribution.

As Solana memecoin volume stabilizes, POPCAT’s recovery depends on community trust restoration and technical upgrades. Long-term holders may view this as a buying opportunity post-washout, but risk management is paramount.

In summary, the POPCAT liquidation cascade on November 13, 2025—wiping 19 leveraged longs and shifting $5M bad debt to HLP—exposes critical flaws in memecoin leverage and liquidity design. While community tension runs high, structured trading around $0.0380 support and LP monitoring offers a path forward. Watch on-chain dashboards for HLP depth, avoid high leverage, and prioritize protocol signals over hype in this volatile DeFi sector.