Hyperliquid liquidates a perps position when its margin ratio falls below the maintenance threshold for its asset and leverage tier. The HLP vault absorbs the position at a mark-based liquidation price, the insurance fund covers any shortfall, and Auto-Deleveraging (ADL) ranks profitable counterparties for socialized close-out only when both fail.
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The three venues all use a maintenance-margin trigger and an insurance fund, but the backstop sequence and who eats the shortfall differs.

Hyperliquid computes margin ratio as account equity divided by maintenance margin required across all open positions. Account equity is wallet balance plus unrealized PnL minus funding owed. Maintenance margin scales with position size and the per-asset tier table published in the protocol docs.
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For a single BTC-USD position at 50x leverage, maintenance margin is roughly half of the initial margin. about 1.25% of notional. Once equity falls below that threshold, the position is flagged for liquidation on the next block.
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A position is liquidated when its margin ratio drops below 1.0 against maintenance margin, evaluated on every block using the mark price (a median of three external oracle feeds plus the Hyperliquid mid). Three common triggers:

The mark-price oracle (not the last trade) prevents single-block wicks from triggering false liquidations. a concern that surfaced after the March 2025 JELLY squeeze and led to tighter oracle weighting.
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In cross-margin mode, Hyperliquid attempts a partial liquidation first: it closes a portion of the largest losing position to bring the account back above maintenance margin. If partial close-out is insufficient. common in fast moves or concentrated positions. the full position is taken over by the HLP vault.
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Isolated-margin positions skip the partial step. The entire position liquidates as soon as its dedicated collateral hits maintenance margin.
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The HLP (Hyperliquidity Provider) vault is the primary liquidator on Hyperliquid. When a position is flagged, the protocol transfers it to HLP at a liquidation price calibrated to leave a small buffer above the bankruptcy price. HLP then unwinds the position into the order book.
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HLP earns the spread between the liquidation price and the unwind price. When unwind PnL is positive, the surplus flows to HLP depositors. When unwind PnL is negative. for example during a violent gap. the loss is absorbed by HLP first, then by the insurance fund. See HLP Vaults: How Hyperliquid's Liquidity Provider Works for the vault's full mandate.
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Hyperliquid's insurance fund is capitalized from a fixed share of liquidation fees and a portion of HLP's positive PnL. It sits onchain and is drawn down only when HLP cannot close a liquidated position above its bankruptcy price.
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The fund's balance is visible onchain and published in the protocol's stats endpoint. As of early 2026 it sits in the low tens of millions of dollars. enough to absorb routine slippage but not a black-swan cascade, which is what ADL is for.
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When HLP and the insurance fund are both exhausted, Hyperliquid invokes Auto-Deleveraging. ADL force-closes profitable counterparty positions to cover the bankrupt one. Counterparties are ranked by unrealized profit times effective leverage. the most profitable, most leveraged traders are deleveraged first.
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ADL is rare on Hyperliquid. it has only triggered during extreme single-asset moves where HLP could not unwind fast enough. When it does trigger, the closure happens at the bankruptcy price, not the mark, so the deleveraged trader still books their gain through that price.
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A trader opens a $100,000 BTC long at 50x leverage with $2,500 in margin. Entry: $70,000. Initial margin: 2.5%. Maintenance margin: 1.25% (~$1,250).

If BTC had gapped to $68,500 before HLP could unwind, the insurance fund covers the $625 shortfall. If multiple such positions liquidate simultaneously and exhaust the fund, ADL closes profitable shorts at the bankruptcy price.
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Three practical defenses:

For the underlying leverage math, see Hyperliquid margin and leverage. For the fee schedule that funds the insurance fund, see Hyperliquid fees.
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Maintenance margin tiers, oracle composition, HLP and ADL logic are drawn from the Hyperliquid protocol documentation at hyperliquid.gitbook.io. Comparison thresholds for dYdX v4 and Binance Perps are taken from each protocol's published margin schedule. Example numbers are illustrative. actual liquidation prices vary block-by-block with oracle moves and tier brackets.
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