Liquidations

Liquidations on Hyperliquid occur when account equity falls below the maintenance margin. The process is designed to protect the system while directing value to the community.

Two-Stage Process

Stage 1: Market Orders

Positions are first closed by sending market orders to the book. If filled, remaining collateral stays with the trader. This is the preferred outcome.

Stage 2: Backstop Liquidation

If equity falls below 2/3 of maintenance margin without successful market liquidation, the backstop kicks in:

• Cross positions transfer entirely to the liquidator vault (HLP)
• Isolated positions transfer separately; cross margin remains untouched

Partial Liquidations

For positions exceeding 100,000 USDC (10k on testnet):

• Only 20% of the position is sent as a market liquidation order
• 30-second cooldown follows
• All subsequent market orders target the entire remaining position

Liquidation Price Formula

liq_price = price - side × margin_available / position_size / (1 - l × side)

Where:

• l = maintenance leverage
• side = long (1) or short (-1)
• margin_available varies by position type (cross vs isolated)

Community Benefit

“The pnl stream from liquidations go entirely to the community through HLP.”