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 affect short-term performance:

• 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

2. Negative Funding Rates

Liminal captures yield from funding payments in Hyperliquid’s perpetual markets. These rates are dynamic and may sometimes turn negative:

• Short-term dips can occur when funding turns negative on specific assets

• Over the long term, average funding remains net positive across most market conditions

Note: Liminal charges a performance fee only when gross funding PnL is positive. If no yield is earned, users pay no fees.

3. Infrastructure Risk (Hyperliquid)

Liminal operates entirely on Hyperliquid’s infrastructure, specifically:

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

• Native liquidity and price feeds provided directly by Hyperliquid

As a result, when Hyperliquid is down or under maintenance, Liminal is also affected. This includes potential pauses in execution, updates, or withdrawals. While Hyperliquid has demonstrated high reliability and is built for high-frequency trading, this dependency means any infrastructure disruption may impact strategy performance or capital access.

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.

9. Asset Volatility Risk

Some strategies may include highly volatile or low-cap assets, for example, meme coins like FARTCOIN. These assets tend to:

• Trigger more frequent rebalancing

• Increase execution costs due to price swings and low liquidity

• Reduce net yield over time despite attractive funding rates

While such assets can offer higher short-term returns, they carry a higher risk of instability. Users should carefully assess the risk/reward profile of each strategy before depositing.

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

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 reach out to the team via the Liminal Support Discord.