When you trade on a DEX, your funds interact with computer code (smart contracts) that may contain bugs or vulnerabilities that hackers can exploit to steal your money. Unlike traditional exchanges where you might have legal recourse, if a smart contract is hacked or fails, your funds could be permanently lost with no way to recover them.
DEXs often rely on external data sources called oracles to determine asset prices, but these can be manipulated by attackers or may fail during critical moments. If the oracle provides wrong price information, you might receive unfair trade prices or your positions could be incorrectly liquidated, resulting in unexpected losses.
You may not be able to trade your tokens at the price you expect, especially for larger amounts, because there might not be enough buyers or sellers available. During market stress, other users who provide liquidity to the DEX may withdraw their funds, making it even harder and more expensive for you to complete your trades. Moreover, due to such market stress, black swan event and/or equivalents, you may face liquidity risks by other elements including but not limited to liquidations, precompile dependency, platform security and funding rates.
There is a time delay of several seconds between when your spot trade is filled and when the corresponding hedge position can be executed, during which market prices may move against you. This brief window of unhedged exposure can result in losses if the market moves unfavorably before your risk management positions are fully established.
Other users or bots can see your pending transaction and place their own trades ahead of yours by paying higher fees, potentially causing you to receive worse prices than expected. These "front runners" profit at your expense by buying before you (driving prices up) or selling after you (driving prices down), reducing the value you get from your trades.
The spot price and futures price of the same asset may diverge significantly from their expected relationship, creating pricing inefficiencies that can result in losses if you're trading products that rely on these prices staying aligned. When spot and futures prices "depeg" or drift apart beyond normal ranges, arbitrage opportunities may be limited or unavailable, leaving you exposed to unfavorable pricing until the relationship normalizes.
As Hyperliquid platform offers decentralized leverage perps, Hyperliquid could face regulatory scrutiny, especially in jurisdictions cracking down on derivatives trading. Changes in laws might restrict access, impose taxes, or lead to delistings, affecting liquidity and usability.