📉 Calculating Liquidation Risk
Learn to monitor health factors and liquidation thresholds
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0 / 5 completed📊 Calculating Liquidation Risk
Understanding how to calculate your liquidation price and risk levels is essential for managing DeFi positions safely. Let's explore the math behind liquidation risk.
Key Formulas
🔢
Health Factor
HF = (Collateral Value × Max LTV) / Borrowed Amount
If HF < 1.0, position is liquidatable. Always keep HF >1.5 for safety.
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Liquidation Price
Liq Price = (Borrowed / Collateral) / Liquidation Threshold
The asset price at which your position becomes liquidatable.
📏
Loan-to-Value Ratio
LTV = (Borrowed Amount / Collateral Value) × 100
Shows how much you've borrowed relative to collateral. Lower is safer.
🎮 Interactive: Liquidation Calculator
Adjust your position to see liquidation risk in real-time:
Collateral (ETH)10 ETH
Borrowed Amount$6,000
Current ETH Price$2,000
Collateral Value
$20,000
LTV Ratio
30.0%
Health Factor
2.50
Liquidation Metrics
Liquidation Price$705.88
Price Drop Until Liquidation64.7%
Buffer Room$9,000
✅Safe Position
ETH can drop to $705.88 (64.7% down) before liquidation.
Risk Levels by LTV
| LTV Range | Risk Level | Health Factor | Recommendation |
|---|---|---|---|
| 0-40% | Very Low | >1.8 | Safe for long-term positions |
| 40-60% | Low | 1.2-1.8 | Monitor during volatility |
| 60-75% | Medium | 1.0-1.2 | Check daily, have buffer ready |
| 75-85% | High | <1.0 | Immediate action required |
| >85% | Critical | <0.9 | Liquidation in progress |
⚡
Real Example: March 2020 Crash
During the COVID-19 crash, ETH dropped from $200 to $90 in hours. Many positions with HF 1.2-1.5 were liquidated. Liquidators earned millions, but borrowers with HF >2.0 survived unscathed.
Lesson: Even "safe" positions can be liquidated in black swan events. Always maintain HF >2.0 if you can't monitor 24/7.