Risks

Liminal is designed to minimize risk while providing real, market-neutral yield. However, as with any protocol operating on advanced onchain trading infrastructure, some risks remain. This page outlines the primary risks associated with using Liminal and how the system is structured to manage or mitigate them.

1. Market Risk is Minimized, Not Eliminated

Liminal relies on delta-neutral strategies to remove exposure to market direction. However, certain market conditions can still influence short-term outcomes:

• Sudden spikes in volatility may temporarily affect balance between spot and perp positions

• Sharp funding rate reversals can reduce or negate expected yield

Liminal actively rebalances to maintain neutrality, but unpredictable events can still impact results.

2. Negative Funding Rates

Yield in Liminal is generated from funding rate payments in Hyperliquid’s perpetual markets. These rates are dynamic and may not always be positive:

• When funding turns negative, the strategy may underperform

• The system monitors trends and can reduce or exit positions when conditions become unfavorable

Note: Liminal only charges a performance fee on realized profits. If no yield is earned, users pay no fees.

3. Infrastructure Risk (Hyperliquid)

Liminal runs entirely on Hyperliquid’s trading infrastructure, specifically:

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

• Liquidity and price feeds native to Hyperliquid

Any issue in Hyperliquid’s infrastructure, such as downtime or order routing failures, could impact performance or access to capital. While Hyperliquid is designed for high-frequency trading and has demonstrated resilience, infrastructure dependency remains a consideration.

4. Stablecoin Risk (USDC)

All deposits on Liminal are in USDC. Users should consider:

• Risk associated with the issuer (Circle)

• The possibility of depegging during extreme market events

While USDC is broadly trusted, no stablecoin is completely risk-free.

5. Execution Risk

Liminal automates strategy execution across multiple market layers:

• Entry and exit of spot and perp positions

• Dynamic rebalancing and position sizing

• Spread management between markets

Market depth, latency, or sudden slippage can occasionally cause execution inefficiencies. Liminal is engineered to monitor and reduce these effects automatically.

6. Liquidity Constraints

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

• Withdrawals may be slightly delayed to unwind positions safely

• Price discrepancies between markets may affect the final execution value

Users always maintain the right to withdraw their capital, although the protocol may optimize the timing of exit execution to preserve strategy efficiency.

7. Smart Contract Risk (Not Applicable Today)

Liminal does not currently use smart contracts or rely on the HyperEVM. The system operates directly on HyperCore’s execution layer.

In the future, smart contract integration may become possible through precompiles on Hyperliquid. When this becomes relevant, it will introduce new considerations around contract safety and code audits.

8. Institutional Authorization Risk

Institutional users authorize Liminal to execute strategies via Hyperliquid’s agent system. Although:

• Agents are permissioned to place trades

• They cannot access or withdraw funds

Users should understand and trust the delegation system before enabling agent-based execution.

How Liminal Manages Risk

Liminal employs several mechanisms to reduce exposure and preserve capital integrity:

• Automated position rebalancing and liquidation avoidance

• Low-leverage strategy design

• Real-time dashboards for visibility into performance

• Always-on withdrawal access with market-aware safeguards

• Aligned incentives with performance-only fee structures

Final Note

All yield strategies involve risk. Liminal is built to minimize it, but not eliminate it. There are no smart contracts at this time, and the system is tightly integrated with Hyperliquid's execution engine.

Always assess your personal risk tolerance, and only deposit capital you are comfortable managing.

For more information or assistance, visit liminal.money or join the Liminal community on Telegram.