Security & Risk Considerations

Liminal Customized is designed with a strong focus on security, capital protection, and risk management. By maintaining fully delta-neutral positions, the strategy eliminates directional market exposure, your yield does not depend on whether prices go up or down. However, since Liminal operates on advanced on-chain trading infrastructure, certain operational, liquidity, and funding-related risks remain. This section explains how custody works, outlines the key risk factors, and details the safeguards in place to protect your capital and ensure strategy continuity.

Custody and Security Measures

In Regular Mode, your funds are held in an Externally Owned Account (EOA) generated specifically for you:

• Each user has a dedicated, segregated EOA

• All signature operations are executed within an off-internet enclave, and private keys are encrypted at rest using AES-256 to ensure maximum security

• Withdrawals can only be initiated by you via the Liminal app and can only go to your linked withdrawal address

Self-Custody Mode

In Self-Custody Mode, your funds remain entirely under your control within a Hyperliquid sub-account:

• Liminal is authorized as an agent with trade-only permissions, it cannot transfer or withdraw your funds

• You can revoke this authorization at any time directly from Hyperliquid’s website via the API page

• This mode gives you full custody but requires slightly more active monitoring, as you may occasionally need to take small actions (e.g., adjusting balances after a rebalance). However, Liminal continuously monitors your positions and implements safeguards to help prevent unwanted liquidations.

Risks

Liminal Customized is designed to minimize risk while providing real, sustainable, market-neutral yield. However, since strategies run on advanced on-chain infrastructure, certain risks remain. This section outlines the primary risks and explains how Liminal Customized manages or mitigates them.

1. Market Risk Is Minimized, Not Eliminated

Delta-neutral positioning eliminates exposure to price direction, but short-term fluctuations in your balance can still occur due to:

• Sudden volatility temporarily impacting the spot/perp balance

• Wider spreads during rebalances or rapid price moves

Liminal’s engine automatically rebalances positions when needed and uses conservative leverage to maintain wide safety buffers.

2. Negative Funding Rates

Liminal Customized captures yield from perpetual funding payments on Hyperliquid. These rates are dynamic and can occasionally turn negative:

• Negative periods may temporarily reduce returns

• Over the long term, most major assets have historically remained net positive

Liminal charges a performance fee only on positive funding PnL. If there’s no yield, there are no fees. If an asset consistently delivers poor funding, you can switch strategies or choose another market.

3. Hyperliquid Infrastructure Risk

Liminal Customized operates entirely on Hyperliquid’s infrastructure:

• HyperCore for real-time execution across spot and perpetual markets

• Native liquidity and price feeds provided directly by Hyperliquid

If Hyperliquid experiences downtime or maintenance, Liminal strategies may be temporarily paused including position updates, rebalancing, or withdrawals.

Your funds remain safe in your dedicated EOA or Hyperliquid sub-account, and execution resumes automatically when systems are back online.

4. Stablecoin Risk (USDC)

Liminal Customized operates on HyperCore, which is USDC-native. All strategies ultimately settle in USDC, which carries:

• Issuer risk (Circle)

• Possible depegging during extreme events

While USDC is widely trusted, no stablecoin is fully risk-free.

5. Liquidity Constraints

Liminal processes deposits and withdrawals in real time, but during high-volatility or low-liquidity conditions:

• Withdrawals may be slightly delayed to unwind positions safely

• Large exits may be processed in stages to minimize slippage

Your funds always remain accessible, but execution timing may be optimized to protect capital.

6. Auto-Deleveraging (ADL) Risk

Auto-Deleveraging (ADL) mechanisms exist across all major perpetual futures exchanges, not just Hyperliquid. They act as a last-resort safeguard to prevent systemic bad debt when normal liquidation processes fail under extreme volatility.

On Hyperliquid, liquidations first occur directly through the order book, where the system attempts to close positions progressively based on available market depth. If remaining positions cannot be absorbed, the Hyperliquid Liquidity Provider (HLP) intervenes as a backstop liquidator to stabilize the market. Only if the HLP itself becomes undercollateralized does the ADL mechanism trigger, force-closing positions from profitable counterparties to restore balance.

Although such situations are extremely rare, they can lead to the early closure of certain positions, including Liminal’s perpetual hedges. This may temporarily affect realized PnL or yield consistency during periods of severe market stress.

Liminal continuously monitors market conditions and volatility to assess and manage risks related to potential ADL events, but users should understand that ADL is an exchange-level safeguard fully managed by Hyperliquid and outside of Liminal’s control.

While the likelihood of ADL can be minimized through prudent risk management, it can never be fully eliminated.

7. Self-Custody Operational Risks

When using Self-Custody Mode, a few additional considerations apply:

• Agent authorization: Valid for 6 months. Before it expires, you’ll receive a notification. Simply return to the Liminal app, revoke the expired agent, and approve the new one.

• Adjusting balances: The app may prompt you to adjust spot/perp balances manually. There’s no urgency, your exposure remains delta-neutral, but the affected funds won’t earn yield until you confirm.

• Do not manually trade: Avoid placing trades or transferring funds directly in your Hyperliquid sub-account. Manual interaction will pause the strategy and may require a reset via a deposit/withdraw cycle.

8. Asset Volatility & Leverage Risk

Some strategies may involve highly volatile or low-cap assets. These can:

• Trigger more frequent rebalancing

• Increase execution costs due to sharp price swings

• Reduce net yield over time despite attractive funding

Additionally, even on more stable assets like $BTC, $ETH, or $SOL, using higher leverage narrows safety buffers and can increase the frequency of rebalances or liquidation risk.

Liminal enforces strict leverage caps, position limits, and dynamic TVL controls to manage these risks, but users should carefully assess the risk/reward trade-off before allocating capital.

Final Note

Liminal Customized is designed to deliver sustainable, market-neutral yield while prioritizing capital protection. While risk is minimized, it cannot be entirely eliminated. Always assess your personal risk tolerance and only deposit funds you’re comfortable allocating.