What is Partial Liquidation in a Crypto-Backed Loan?
Partial liquidation occurs when your cryptocurrency collateral is sold to reduce the loan-to-value (LTV) ratio of your loan back to the starting level if the liquidation threshold is reached or after a margin call is not resolved within the 24-hour cure period. It helps to protect your loan from becoming too risky due to market fluctuations.
When Does Partial Liquidation Happen?
Partial liquidation can be triggered in two instances:
Unresolved Margin Call: If your LTV exceeds the margin call threshold and you do not take action within the 24-hour cure period, your collateral will be partially liquidated to bring the LTV back to the starting level. For example, for Bitcoin, the starting LTV is 60%.
Liquidation Threshold: If the LTV exceeds the liquidation threshold (e.g. 80% for Bitcoin), your collateral will be liquidated automatically, even if the cure period is still in effect.
The specific thresholds at which these happen are subject to change and vary between different assets. To find the latest ones, refer to your loan application. If you already have an active loan, you will find this on your active loan page.
Is There a Fee for Partial Liquidation?
Yes, a fee (typically 2%) is applied to the amount liquidated. This covers the cost of managing the liquidation process.
How Will I Be Notified?
Email Notifications: You will receive an email once the partial liquidation occurs, informing you of the amount liquidated and the updated status of your loan.
Dashboard Update: After liquidation, your dashboard will display the new LTV, remaining collateral, and all other relevant loan details.
What Happens After Partial Liquidation?
Once the partial liquidation is completed, your LTV will be restored to the starting level, and you can continue with your loan. Be sure to monitor your LTV closely to avoid future margin calls or liquidation events.
If you have further questions or need assistance, feel free to reach out to our support team.