Hyperliquid has no insurance fund. When account equity falls below maintenance margin, the position is first liquidated with market orders on the public order book, per Hyperliquid Docs. Only if equity drops below 2/3 of maintenance margin does the HLP liquidator vault take over, and auto-deleveraging is the final solvency backstop, per Hyperliquid Docs.
​

Liquidation on Hyperliquid runs in a fixed order. The order book gets the first attempt, large positions are worked down in slices, a vault inside HLP steps in only for accounts that fall much further, and auto-deleveraging exists so the platform never carries bad debt. No separate insurance fund sits anywhere in that chain.

A position becomes liquidatable once account equity drops below maintenance margin. Maintenance margin is set per asset from its maximum leverage, so higher-leverage markets liquidate after smaller adverse moves. The check uses the mark price, not the last trade, which keeps one thin print on the book from setting off a liquidation.
​

Maintenance margin is half of the initial margin at max leverage, which puts it between 1.25% for 40x assets and 16.7% for 3x assets, according to Hyperliquid Docs. Liquidations use the mark price, which combines external CEX prices with the Hyperliquid book state, per Hyperliquid Docs.
​

Cross and isolated margin behave differently. A cross position uses all cross collateral, so its liquidation price does not depend on the leverage setting, while an isolated position liquidates against only the margin assigned to it, per Hyperliquid Docs.
​

No. Hyperliquid does not run an insurance fund the way centralized exchanges do. Losses that the order book cannot absorb go first to the liquidator vault inside HLP, and if an account still ends up negative, auto-deleveraging closes profitable opposite positions. HLP depositors, not an exchange-owned fund, carry the backstop risk.
​

The Hyperliquid Docs describe the liquidator vault as a component strategy of HLP and state that liquidation profits go entirely to the community through HLP. They also state there is no clearance fee on liquidations, unlike centralized exchanges. The Hyperliquid Docs call auto-deleveraging the final safeguard that keeps the platform from holding bad debt.
​

For how HLP itself works, see Hyperliquid Vault Strategies: HLP and User Vaults.
​

Most liquidations never reach the vault. The protocol sends market orders for the position to the public book, where any trader can take the flow, and if the account gets back above maintenance margin the trader keeps whatever collateral is left. Large positions are cut in slices to limit price impact on the book.
​

Market liquidation orders are sent for the full position size and may fill fully or partially, per Hyperliquid Docs. For positions above 100k USDC, only 20% of the position is sent per market liquidation order, followed by a 30 second cooldown during which orders cover the entire position, per Hyperliquid Docs.
​

The backstop applies only when the book could not bring the account back to health and equity keeps falling. At that point the liquidator vault takes the whole position, and the trader loses the maintenance margin rather than getting it back. That loss is the buffer that keeps backstop liquidations profitable for HLP on average.
​

Positions below 2/3 of maintenance margin can be taken over by the liquidator vault, per Hyperliquid Docs. A backstop-liquidated cross account transfers all cross positions and cross margin to the liquidator, while an isolated backstop moves only that position and its margin, per Hyperliquid Docs.
​

Auto-deleveraging only fires when an account or isolated position has negative value, meaning even the backstop could not cover it. Traders on the other side who are most in profit and most leveraged are the first to be deleveraged. The rule exists so that the platform never carries bad debt and traders with no open positions never share losses.
​

ADL ranks opposite-side users by the index (mark_price / entry_price) * (notional_position / account_value) and closes them at the previous mark price, per Hyperliquid Docs. The same page states that a user with no open positions will not socialize any losses of the platform.
​

The practical defenses are lower leverage, isolated margin for single-thesis trades, and a stop-loss above the liquidation price. A stop exits before the book liquidation starts, and it also guards against the worse case, a backstop liquidation, where the maintenance margin is not returned to the trader.
​

The Hyperliquid Docs recommend stop loss orders or exiting before mark price reaches the liquidation price to avoid losing maintenance margin. For stop and reduce-only mechanics see Hyperliquid order types, and for leverage math see Hyperliquid margin and leverage. Fee detail is in Hyperliquid fees.
​