Curriculum·R402 Margin and Liquidation Mathematics·about 43 min
Deriving the liquidation price
By the end of this lesson you can
- →Derive the liquidation price from first principles rather than reading it off a screen
- →Include fees and accrued funding, and compute how far they move the price
- →Show how adding or withdrawing margin moves the liquidation price, and by how much
- →Explain why a position larger than the book can be cheaper to liquidate than to close
Senior · enrolled learners
This lesson opens with The Hyperliquid margin withdrawal, 12 to 13 March 2025.
- What happened
- An address opened a very large long in ether on Hyperliquid, reported as roughly 160,000 ETH worth about $307M against a deposit of about 15.23 million USDC, taken at the venue's maximum leverage for the asset. The position moved into profit. Rather than closing it in the order book, the trader began withdrawing collateral, which raised the liquidation price on the remaining long toward the market. When the price reached it, the venue's liquidation engine took the position over and the HLP vault absorbed it, recording a loss of about $4M. The trader realized over $1.86M. Nothing was exploited and no rule was broken. The liquidation formula was used deliberately, in the direction it points.
- The decision point
- Every trader is told the liquidation price is a thing to avoid. It is an output of an equation whose inputs are entry, size, margin, maintenance rate, fees and accrued funding, and the trader controls one of those inputs continuously. Withdrawing margin moves the price toward the market on purpose. If your position is larger than the book can absorb, the liquidation engine is an exit that fills at the mark and passes the difference to somebody else.
- Recorded loss
- $4,000,000
What you will be able to answer
- →What is the liquidation price for a long?
- →What do fees and funding do to it?
- →What does withdrawing margin do?
- →Why liquidate rather than close?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://info.arkm.com/research/hyperliquid-whale-passes-4m-loss-to-hlp-vault
- https://www.ainvest.com/news/whale-liquidation-triggers-4m-loss-hyperliquid-eth-prices-fall-2503/
- https://cryptoslate.com/why-viral-public-whale-liquidations-are-becoming-a-real-trading-signal-on-hyperliquid/
- https://www.coindesk.com/markets/2025/03/26/hyperliquid-delists-jellyjelly-after-vault-squeezed-in-usd13m-tussle
Confidence medium·Volatility medium·Reviewed 2026-08-07·Owner unassigned
Contested
Reported details of the Hyperliquid trade differ. The headline leverage is reported as 50x, being the venue maximum for the asset at the time, while reconstructions of effective leverage across the position's life range from about 13.5 to 19.2 times. The date is reported as both 12 and 13 March 2025. The deposit near 15.23 million USDC, the position near 160,000 ETH and about $307M, the roughly $4M loss to HLP and the trader's realized profit above $1.86M are consistent across sources and are the load bearing figures.
The formula in part one is the standard isolated-margin long case. Cross margin, inverse contracts, tiered maintenance and venues that include unrealised profit from other positions all modify it. R402-L1 requires the calculator to handle both directions, both margin modes, fees and funding, and to be validated against a live venue's published numbers.
J304-02 derives a liquidation price for an overcollateralised loan, where the trigger is a loan-to-value ratio. This lesson derives it for a margined derivative, where the trigger is equity against a maintenance requirement. The algebra differs and the discipline is the same. Keep the split.