🍾Risks and Liquidations

Trading is FUN but there are always risks involved. As with everything in life - no risk, no reward.

• When you open a position on Sonic.Fun, your maximum risk is always your collateral. If the price moves completely against you, you can lose 100% of your collateral, but you can never lose more or owe money to the protocol.

• There are forced liquidation like on perpetual futures platforms (e.g., GMX). If your position simply becomes worthless if the market moves far enough to offset your collateral and at some point will be liquidated by the Funding Fee mechanism.

• Because your position is synthetic, the leverage only amplifies the size of your trade for profit and fee calculations — it does not borrow funds from a lending pool that can be liquidated.

• There are no margin calls, so you don’t have to worry about partial liquidation levels or automatic stop-outs.

• Fees (PnL fee and funding fee) keep running as long as your position stays open and will eat into your final payout if you stay too long.

• The profit cap ensures that if you win big, your payout cannot exceed 50× your initial collateral, no matter how high your leveraged profit goes. This might change in the future with the profir cap increase.

• The daily withdrawal limit also controls how much you can take out each day to protect protocol liquidity in extreme scenarios.

• This structure makes Sonic.Fun simple to understand: your downside is limited to your deposit, your upside is capped at 50×, and there is no debt or hidden liquidation risk beyond losing your stake.