Part 2/7:
The Loan to Value Ratio (LTV) illustrates the relationship between the amount of borrowed assets relative to the value of the collateral. It's a vital KPI for determining the health of a borrowing position. A lower LTV generally indicates a safer position, while a higher LTV indicates a greater risk of liquidation.
Liquidation Threshold
The liquidation threshold is the tipping point at which a loan can lead to liquidation if the collateral's value falls below a certain point. If your LTV exceeds this threshold, the platform automatically liquidates your assets to repay the borrowed amount. This makes understanding both the LTV and the liquidation threshold critical for maintaining a healthy financial position.