# Canonical: https://www.uddalak.xyz/hyperliquid-academy/article/22-lending-borrowing-carry
# Author: Uddalak Das
# Last source: https://www.uddalak.xyz/hyperliquid-academy/article/22-lending-borrowing-carry

---
title: "Lending, Borrowing, and Carry Trades on HyperCore"
description: "How Portfolio Margin creates borrowing demand, supply yield, and spot-perp carry strategies."
track: "Capital & DeFi"
level: "Advanced"
primary_icp: ["trader", "DeFi-native user"]
secondary_icp: ["institutional decision-maker"]
reading_time: "6 min"
last_reviewed: "2026-09-07"
---

# Lending, Borrowing, and Carry Trades on HyperCore

Portfolio Margin adds native borrowing and supply mechanics to HyperCore. Eligible collateral can support borrowing, idle borrowable assets can earn interest when used by other accounts, and the resulting capital can be combined with spot and perpetual positions.

A carry trade is a useful way to see how these pieces interact because its return depends on several cash flows at once.

```mermaid
flowchart LR
    A[Eligible collateral] --> B[Borrow quote asset]
    B --> C[Buy spot]
    C --> D[Short corresponding perp]
    D --> E[Directional exposure reduced]
    E --> F[Return depends on funding basis borrow cost fees]
```

## Borrowing starts with collateral capacity

Each eligible collateral asset has a loan to value parameter. That parameter describes how much borrowing capacity the collateral can support before other risk controls are considered.

A simple example helps. If $10,000 of collateral had a 0.65 loan to value ratio, the starting theoretical borrowing capacity would be $6,500. The actual usable amount can be lower because portfolio risk, caps, maintenance requirements, other positions, and current prices also matter.

The system can borrow automatically when an eligible action needs more of a borrowable asset than the account currently holds.

## Suppliers fund the borrowing side

Borrowing demand creates interest payments. Eligible supplied balances can earn when they are being used by borrowers.

The rate is utilization sensitive. As more of the available supply is borrowed, additional borrowing becomes more expensive. That mechanism helps ration scarce liquidity and attract more supply.

The supplier's realized yield is not always identical to the displayed borrower rate because protocol reserve mechanics and utilization affect what reaches suppliers.

[How Interest Rates Work in Portfolio Margin](/hyperliquid-academy/article/71-portfolio-margin-interest-rates) covers the rate model separately.

## A carry trade has several economic legs

A common crypto carry structure buys a spot asset and shorts a similar notional amount of perpetual exposure. The two positions offset much of the direct price direction.

The trader then cares about the difference between several cash flows:

- funding received or paid on the perp
- borrowing cost if the spot leg was financed
- spot and perp basis changes
- trading fees and slippage
- interest earned on other supplied balances

Calling the trade market neutral does not make those components disappear.

## Portfolio Margin can reduce idle collateral

If the account holds spot while shorting the same or a related asset, Portfolio Margin can recognize some offsetting risk. The spot asset may also contribute collateral value instead of sitting outside the trading balance sheet.

That can reduce the amount of stablecoin capital needed to maintain both legs compared with fully separated margin systems.

The improvement is capital efficiency, not guaranteed profit.

## Hedged trades still have liquidation paths

Funding can reverse. Borrow rates can rise. Spot and perp prices can temporarily diverge. Liquidity can disappear when both legs need to be closed. Collateral itself can fall in value.

A carry trade can therefore be directionally hedged and still lose money or become liquidatable.

The correct stress test includes both market prices and financing conditions. If the trade only works at today's borrow rate and today's funding, the expected return is fragile.

## Continue reading

Read [The Spot Long Plus Perp Short Carry Trade](/hyperliquid-academy/article/74-spot-long-perp-short-carry-trade) for a worked strategy view, [Basis Trading on Hyperliquid](/hyperliquid-academy/article/75-basis-trading-on-hyperliquid) for the price relationship between legs, and [Portfolio Margin Risk and Liquidations](/hyperliquid-academy/article/23-portfolio-margin-risk) for the account level risk model.

## Sources

- https://hyperliquid.gitbook.io/hyperliquid-docs/trading/portfolio-margin
- https://github.com/dzmbs/hyperliquid-docs/blob/main/docs/trading/portfolio-margin.md
- https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding