Liquidation

Liquidation is the forced sale of your pledged Bitcoin by the lender to repay your loan, triggered when your loan-to-value (LTV) rises past the lender's liquidation threshold and a margin call goes unanswered.

Margin call vs. liquidation

A margin call is the warning; liquidation is the action. When Bitcoin's price falls and your LTV crosses the margin call threshold (often around 80% to 85%), the lender asks you to add collateral or repay. If you don't act within the cure period, or if the price keeps falling to the liquidation threshold (often 90% to 95%), the lender sells enough Bitcoin to bring the loan back to a safe level, or closes the position entirely.

Partial vs. full liquidation

Some lenders liquidate only enough Bitcoin to restore a healthy LTV, returning the rest to you. Others may close the entire position. The loan agreement specifies which, and whether a separate liquidation fee applies on top of the sale.

How to reduce liquidation risk

Borrow at a conservative LTV. A 40% to 50% starting LTV leaves room for a large price drop before any margin call. Monitor your loan, and keep extra Bitcoin or cash available to post if needed. Products where Bitcoin is not pledged as collateral, such as qualify-with-crypto mortgages, carry no liquidation risk from price moves at all.