How do liquidations work?

Your loan on Lava can be liquidated if the value of your collateral approaches a point where it cannot cover the total of your balance owed.

Your loan-to-value ratio (LTV) measures the relationship between the value of your collateral and the loan balance you owe. Draws on your BLOC on Lava start up to 50% LTV, meaning you can borrow up to 50% of the total USD value of the BTC you hold as collateral. If bitcoin goes down in price, the USD value of your BTC decreases, which causes your LTV to rise.

Lines of credit on Lava start at 50% LTV or less— if your LTV increases, we will send you multiple notifications and warnings. You can add collateral or pay down part of your loan at any point to lower your LTV.

When you open your line of credit or make a new draw, you’ll see the BTC price at which a liquidation will happen for your line of credit. You can also monitor your LTV in real time on the line of credit page in the app.

If your LTV exceeds 85%, a portion of your collateral will be sold to cover the outstanding balance of your line of credit. Any remaining collateral will be sent back to your Lava account.

Lava is built to ensure that users have as much protection as possible against having their loans liquidated. On Lava, your line of credit will only get liquidated if you fail to add more collateral or pay down a portion of your line of credit, and we will send you alerts as your LTV increases. Lava also offers Liquidation Protection, which automatically adds collateral to your line of credit from your available bitcoin balance if your LTV exceeds 80%.