Part 3/7:
To illustrate the impact of these metrics, let's consider a hypothetical scenario:
Imagine you have three ETH, valued at $3,000 each, amounting to a total of $9,000. If you choose to borrow $4,000 in stablecoins against this collateral, your LTV stands at approximately 44.4%. As long as your LTV remains below your personal threshold (commonly set around 60%), your position is considered stable.
However, consider what happens if the price of ETH drops to $2,500; the value of your collateral now becomes $7,500. This increase in LTV to 53.33% would warrant further examination. If the situation worsens to a price of $1,700, your LTV could approach the platform's liquidation threshold of 75%, putting your assets at serious risk.