What Is Hyperliquid Portfolio Margin?

Hyperliquid’s Current Isolated Spot and Perps Model

Prior to implementing this portfolio margin update, Hyperliquid maintained separate spot and perps trading account balances. Spot and perp balances were completely separate and isolated, meaning users had to intentionally transfer assets between accounts to use those assets across accounts. That means, for example, that if a user had bought spot HYPE tokens to hold in their spot account, they would have to sell their HYPE tokens for USDC and then transfer the USDC from their spot balance to their perp balance to use it as margin to begin trading perps. This also applied in reverse: if a user held USDC in their perps account and wanted to buy the actual underlying spot tokens instead of buying perps, they would have to sell their position and then transfer the assets (USDC) to their spot account before trading.

More importantly, this isolation mechanism between spot and perps accounts also implies that spot assets cannot be used as eligible collateral assets in the perps account. All perp positions opened within an exchange were cross-margined, while the spot was kept outside this pool of liquidity. Cross-margined liquidity means that all open positions in the Perps account are pooled under one shared collateral balance. Profits from any position increase the shared equity, and losses draw down from that same pool, helping prevent isolated asset liquidations as long as total account equity stays above maintenance.

Hyperliquid’s Future Unified Spot and Perps Model

Hyperliquid’s new portfolio margin update will allow users to unify their spot and perps accounts, enabling greater flexibility and capital efficiency in the future. This update will provide a unified trading platform for both spot and perps trading. Additionally, it will allow eligible collateral assets, such as HYPE, to be used directly as collateral for perp positions without requiring users to convert them to the settlement asset first.

• Interest carry trade: Portfolio margin will unlock additional functionality for users, such as the interest rate carry trade, where exposure from a spot balance is offset by exposure to a short perps position that is collateralized by the underlying spot asset. For example, if a user holds one hundred HYPE tokens and opens a short perps position worth one hundred HYPE tokens, the trade would be delta neutral, meaning it is unaffected by the changing price of HYPE. At the same time, the trader would still be able to collect fees off the funding rate of HYPE if the funding rate is positive. This results in an essentially risk-free method for collecting funding rates, with no exposure to the price action of the underlying asset. It should be noted that this is not a guaranteed trade, and many factors, including funding rate volatility, negative funding rate scenarios, basis risk, execution and slippage fees, and potential borrow interest rates, could potentially offset any income generated by the funding rate.

• Borrowing / Lending: A unified portfolio margin account also allows users to borrow against their spot assets and automatically earn yield on all eligible spot assets that are not actively being used for trading. The borrowing and lending aspects of the update will rely on Hyperliquid’s assigned LTV (loan-to-value) ratios to different assets based on their assigned risk level. For example, during the pre-alpha stage, HYPE will have an LTV of 0.5, meaning users can borrow against their HYPE tokens at up to half the market price of HYPE. For example, if you hold HYPE worth $1,000, with LTV 0.5 you can borrow up to $500 in a borrowable asset like USDC to open various perps positions.

• After enabling portfolio margin, if a user submits a perp order and does not have enough USDC collateral to place against the trade, the system will automatically borrow it against any eligible collateral, subject to each asset's LTV capacity and any per-asset/user caps.

• The borrow limit formula is as follows: token_balance × borrow_oracle_price × LTV. The oracle assigns and converts your collateral asset holdings to a USDC value.

• Borrowing and lending assets result in a live interest rate that borrowers pay, and lenders receive. Borrowed assets will accrue interest continuously and are indexed to an hourly rate, matching the perp funding interval. Portfolio margin users will pay interest on borrowed assets and earn interest on idle assets according to the same rate.

  • During the pre-alpha phase, the borrow interest rate for stablecoins is set at 0.05 + 4.75 * max(0, utilization - 0.8) APY, compounded continuously depending on the instantaneous value of utilization = total_borrowed_value / total_supplied_value.

  • The earned interest from borrowers is accrued proportionally to all lenders, while the protocol retains 10% of all borrowed interest as a buffer for future liquidations.

• An example of the borrowing and lending process from end to end is as follows:

  • You have 2,000 USDC and 1,000 HYPE. In this example, the HYPE oracle assigns a value of $20 to each token. As a result, you would be able to borrow $10,000 from the 1,000 HYPE tokens worth a total of $20,000 because of the 0.5 LTV ratio. If you open a perp position that needs $5,000 USDC margin but only have 2,000 USDC, the Hyperliquid system will automatically borrow $3,000 against your HYPE tokens. The $3,000 position in HYPE will begin to accrue interest while the remaining $17,000 of idle HYPE will earn yield from others who are borrowing margin to open new perps positions.

• Liquidations: Since portfolio margin unifies both perp and spot accounts, liquidations are triggered when the entire portfolio margin account (spot and perp) falls below its portfolio maintenance margin requirement. Users will be able to monitor their portfolio maintenance margin requirement via the portfolio margin ratio (equity/risk-weighted notional value), which has been initially set at 0.95. As a result, when the notional value of the portfolio assets (when being converted to USDC) goes below the portfolio margin ratio, the entire account will become liquidatable.

• It should be noted that, depending on the order of Hyperliquid’s oracle price updates, either the perps positions or the spot borrow positions may be liquidated first. This means that once an account reaches the portfolio margin ratio and becomes liquidatable, users could have either positions liquidated first and should not expect a deterministic liquidation sequence.

Looking ahead into the future, this portfolio margin update will expand functionality for users between Hyperliquid L1 HyperCore and Hyperliquid EVM. The connection between Hyperliquid L1 HyperCore and Hyperliquid EVM will be facilitated by Hyperliquid CoreWriter, a fixed precompiled system contract that bridges write access from the Hyperliquid EVM to the Hyperliquid L1 HyperCore execution environment. This is essential for cross-over activity because the CoreWriter contract will turn Hyperliquid EVM from a read-only sidecar into an active settlement and programming layer built on top of Hyperliquid L1 HyperCore’s liquidity.

As a result of this new development, developers and builders will be able to build new DeFi apps on Hyperliquid EVM, such as programmatic order routing, vault management, staking flows, and asset sends, which are directly driven by smart contracts that read the live Hyperliquid L1 HyperCore state via precompile functions. This will allow the Hyperliquid ecosystem to grow with new protocols like borrowing and lending protocols for Hyperliquid L1 HyperCore assets on Hyperliquid EVM, facilitated via fully on-chain yield-bearing ERC-20 token contracts maintained through CoreWriter and precompile functions. Since the portfolio margin update introduces an organic borrowing and lending market, thereby creating additional demand to borrow, this update should also expand the value proposition for teams building new protocols on Hyperliquid EVM.

Current Portfolio Margin Update Status

As of writing, the portfolio margin mechanism is live on Hyperliquid testnet in pre-alpha mode and is now live on Hyperliquid mainnet in pre-alpha mode. In the current pre-alpha phase, there are set caps on lendable assets, available collateral, and the amount of money that each account can lend out.

• Initial limits for portfolio margin mainnet pre-alpha phase:

  • Each master account must have conducted over 5M USDC in trading volume before enabling the portfolio margin update.

  • USDC: 5M USDC global supply cap, 1M USDC global borrow cap, 5k USDC user supply cap, 1k USDC user borrow cap

  • HYPE: 200k HYPE global supply cap, 200 HYPE user supply cap

Once the preset caps are reached, a user's account will automatically revert to “normal” mode, where spot and perps balances are kept separate once again. Additionally, as of the time of writing, only USDC can be borrowed, and HYPE is the only asset that users can currently use as collateral. Moving forward, plans are in place to add USDH, Hyperliquid’s native fiat-backed dollar stablecoin, as a lendable asset, and BTC as an additional collateral asset.

Users can view the Hyperliquid Testnet Explorer and request 1,000 mock USDC on testnet using the faucet to begin testing the application of the new portfolio margin update before using real money on mainnet.

Once users are comfortable on the testnet, they can view the Hyperliquid Mainnet Explorer and begin testing the new portfolio margin update by enabling it. Users can enable portfolio margin by clicking the "Classic" button on the Trade page on desktop or the "Cross" button on mobile and going to the "Account Unification" tab. Users can also supply USDC to earn yield on the Earn page. Users can check the Borrow Cap Used to see how much they can borrow and the Portfolio Margin Ratio to monitor their account health.

If users run into any issues or have any questions about the update or the Hyperliquid ecosystem in general, join the Hyperliquid Discord server to be able to pose questions to Hyperliquid team members and speak to other Hyperliquid community members.