A sharp selloff in a SpaceX-linked crypto contract triggered a cascade of retail liquidations, highlighting how thin liquidity can exaggerate price moves in synthetic derivatives markets.

Hyperliquid’s SPACEX-USDH perpetual contract experienced a violent flash crash on Thursday, falling from $2,277 to a low of $1,254 in roughly 30 minutes — a near 45% decline — before rebounding to around $2,169. According to Hyperliquid data, the move liquidated 405 users across 1,393 positions, resulting in about $1.51 million in notional losses.

The magnitude of the move was amplified by extremely shallow liquidity conditions. In the 24 hours prior, the contract recorded only $4.87 million in trading volume against open interest of under $2.9 million, leaving limited depth in the order book. When selling pressure hit, the imbalance accelerated the liquidation cascade.

Positioning data suggests a predominantly retail participant base. The median liquidated position carried just $31 in margin, indicating small accounts using leverage with minimal protection against sharp volatility.

The SPACEX-USDH contract is a synthetic perpetual instrument designed to reflect market expectations of SpaceX’s private valuation. Because SpaceX is not publicly traded, traders use the contract to speculate on its implied valuation ahead of any potential IPO.

Unlike perpetual futures tied to highly liquid assets such as bitcoin or ether, the contract lacks a deep underlying spot market. While SpaceX shares do trade in restricted secondary markets, access is limited to accredited investors, leaving the crypto instrument without a broad, continuously priced reference.

At settlement, the contract’s mark price of $2,132 still stood more than $220 above the oracle reference price of $1,908, indicating that even after the crash, the market continued to price in a premium relative to external valuation benchmarks.