Learn how to calculate liquidation price on a crypto loan: the exact formula, worked BTC, ETH, SOL examples, a starting-LTV drawdown table and safety buffers.
Arkadii Kaminskyi
Arkadii Kaminskyi
Head of Operations at Sats Terminal
Head of Operations at Sats Terminal with 5 years of experience in crypto. Specializes in DeFi, yield farming, and borrowing — has reviewed 50+ crypto products.
If you borrow against crypto, one number matters more than your interest rate, your origination fee, or even how much you borrowed: the price at which your collateral gets sold out from under you. Knowing exactly how to calculate liquidation price turns a vague fear of "getting rekt" into a concrete figure you can write on a sticky note, watch on a chart, and defend with a safety buffer. This guide is a formula-first, calculator-style walkthrough of the liquidation price math, with worked examples across Bitcoin, Ethereum, and Solana at different starting loan-to-value ratios. It is not a platform review, and it is not a primer on what a loan is. It is the arithmetic that keeps you in the position.
We will derive the core liquidation price formula from first principles, define the three terms people constantly confuse (liquidation threshold, max LTV, and health factor), build a reference table mapping your starting LTV to the exact percentage drawdown that triggers liquidation, and then show how that price quietly drifts as interest accrues or as you add or remove collateral. We will also separate the DeFi trigger (a health factor hitting 1) from the CeFi sequence (a margin call, then forced sale), and untangle the underrated detail that liquidations key off an oracle price, not whatever you see on your exchange. This is educational content, not financial advice, and protocol parameters change, so always confirm the live numbers before you act.
Here is the equation everything else in this article expands on. For a single-collateral, single-debt loan, your liquidation price formula is:
Liquidation price = outstanding debt / (collateral amount x liquidation threshold)
Read it slowly. The numerator is what you owe, in the units the loan is denominated in (usually dollars or a dollar-pegged stablecoin). The denominator is the quantity of collateral you posted, multiplied by the liquidation threshold expressed as a decimal. The result is the per-unit price of your collateral at which the position becomes eligible for liquidation. Above that price you are safe; at or below it, a liquidator (or a CeFi desk's automated engine) can step in.
The intuition is that liquidation happens when your collateral, valued at the liquidation threshold rather than its full market value, can just barely cover your debt. The threshold is a haircut the lender applies so they are never relying on 100 cents of collateral to back a dollar of loan. Rearranging the health-factor definition gives you the same thing, which is reassuring because it means the formula is not a trick; it falls straight out of how the protocol decides whether you are healthy.
A frequent and expensive mistake is plugging your maximum borrowing LTV into the formula instead of the liquidation threshold. They are different parameters with a deliberate gap between them, and using the wrong one will tell you that you are getting liquidated far earlier (or far later) than you actually are. The next section pins down all three terms so the denominator is never ambiguous again.
These three numbers describe one position from three angles. Confusing them is the root cause of most "I thought I had more room" stories.
The health factor formula used by Aave-style protocols is:
Health factor = (collateral value x liquidation threshold) / outstanding debt
Notice that liquidation (health factor = 1) is just the moment when collateral value x liquidation threshold equals your debt. Set health factor to 1, solve for the collateral price, and you recover the liquidation price formula from the previous section. They are the same statement.
| Term | What it answers | When it matters | Typical 2026 range (blue-chip collateral) |
|---|---|---|---|
| Max LTV | How much can I borrow right now? | At origination and top-ups | 70-75% (Aave-style) |
| Liquidation threshold / LLTV | At what LTV am I liquidated? | Continuously, sets the price line | 78-80% (Aave); 86-91.5% (Morpho markets) |
| Health factor | How close am I to the line? | Continuously, your live dashboard | >1 safe; 1.0 = liquidation |
Rule of thumb: Max LTV decides how much you can borrow; the liquidation threshold decides how much price drop you can survive. Always calculate your liquidation price off the threshold, never off the borrow cap. The gap between them is your free margin of safety, and on some markets it is only a few percentage points.
If you want a fuller conceptual treatment of these parameters, our explainers on the loan-to-value ratio, the health factor, and liquidation go deeper than we can here without losing the calculator focus.
Let's make this concrete. Bitcoin's price swings hard, so we will use round, illustrative figures rather than a live quote; treat the price as a placeholder and substitute the real number when you run your own math. Markets move, and as of mid-2026 BTC has traded across a wide band, so confirm the spot price and your market's parameters before acting.
Setup: You deposit 1 BTC. We will use an assumed price of $100,000, so your collateral value is $100,000. The market's liquidation threshold is 80 percent. You borrow $50,000 in USDC, which is a starting LTV of 50 percent.
Apply the formula:
Translate to a drawdown: BTC would need to fall from $100,000 to $62,500, a drop of 37.5 percent, before liquidation. That is your cushion. A useful shortcut: the percentage drop to liquidation equals 1 minus (starting LTV / liquidation threshold). Here that is 1 minus (0.50 / 0.80) = 0.375, or 37.5 percent. The shortcut works because both the price and the debt scale cleanly, and it lets you sanity-check any liquidation price in your head.
Now borrow more aggressively. Same 1 BTC at $100,000, same 80 percent threshold, but you borrow $70,000 (a 70 percent starting LTV):
The same Bitcoin, the same threshold, but borrowing 70 percent instead of 50 percent shrinks your survivable drop from 37.5 percent to 12.5 percent. A single rough week can erase a 12.5 percent buffer. This is the entire argument for borrowing conservatively, and it is why our piece on how LTV ratios affect your position hammers on starting low.
The formula is asset-agnostic; only the numbers change. Let's run ETH and SOL so you see that the crypto loan liquidation price math is identical regardless of collateral.
Setup: You deposit 10 ETH at an assumed $3,500 each, for $35,000 of collateral. The liquidation threshold is 80 percent. You borrow $14,000 (a 40 percent starting LTV).
At a conservative 40 percent LTV, ETH can halve before you are at risk. ETH is more volatile than BTC, so that wider buffer is appropriate, not excessive.
Setup: You deposit 200 SOL at an assumed $180 each, for $36,000 of collateral. Because SOL is more volatile, assume a lower liquidation threshold of 70 percent. You borrow $18,000 (a 50 percent starting LTV).
Notice that the same 50 percent starting LTV gives Solana only a 28.6 percent buffer versus Bitcoin's 37.5 percent, purely because SOL's lower liquidation threshold (70 percent vs. 80 percent) leaves less room. The threshold is set by the lender precisely because riskier collateral deserves a bigger haircut. If you are borrowing against SOL specifically, our deep dive on SOL-backed loans covers the asset-specific quirks.
Tip: The price you posted at does not appear anywhere in the liquidation price formula. Your liquidation price depends only on your debt, your collateral quantity, and the threshold. Repaying or adding collateral changes it; the entry price does not. Stop thinking in terms of "how far below my buy price" and start thinking in absolute liquidation price.
Here is the table to bookmark. It answers the question everyone actually types into a search bar: what price will I get liquidated at. Because the drawdown depends only on the ratio of your starting LTV to the liquidation threshold, you can read your survivable drop straight off this grid. The formula behind every cell is: percentage drop to liquidation = 1 minus (starting LTV / liquidation threshold).
| Starting LTV | Threshold 70% (e.g. SOL) | Threshold 75% | Threshold 80% (e.g. ETH/BTC) | Threshold 86% (e.g. Morpho) |
|---|---|---|---|---|
| 25% | -64.3% | -66.7% | -68.8% | -70.9% |
| 40% | -42.9% | -46.7% | -50.0% | -53.5% |
| 50% | -28.6% | -33.3% | -37.5% | -41.9% |
| 60% | -14.3% | -20.0% | -25.0% | -30.2% |
| 70% | 0.0% (already at risk) | -6.7% | -12.5% | -18.6% |
Each cell is the percentage your collateral can fall before liquidation. A 70 percent starting LTV against a 70 percent threshold shows 0.0 percent: you are effectively at the line the instant you open it, which is why no sane protocol lets you borrow all the way to the threshold. The columns also illustrate why a higher threshold (like Morpho's 86 percent markets) gives more breathing room at the same LTV, at the cost of a thinner liquidation bonus and faster, harsher liquidations once you do cross.
Warning: A wider buffer on paper is not the same as safety. A 50 percent LTV against a high threshold can still be liquidated in a single bad candle if the asset gaps down 40 percent, which crypto absolutely does. The table tells you the trigger distance; it says nothing about how fast the asset can travel that distance. Volatile collateral needs more buffer even when the math says you have plenty.
The biggest misconception about the bitcoin loan liquidation price is that it is fixed. It is not. The moment you take a loan, three forces start nudging your liquidation price, and only one of them is the collateral price itself.
Your outstanding debt is the numerator in the formula, and on a variable-rate DeFi loan that debt grows every block as interest compounds. More debt means a higher liquidation price, which means a smaller buffer, even if the collateral price never moves. Suppose you borrowed $50,000 against 1 BTC at an 80 percent threshold, for a liquidation price of $62,500. After a year at, say, 7 percent borrow APR with no repayments, your debt is roughly $53,500. Recompute:
Your liquidation price crept up nearly $4,400 while you slept, purely from interest. This silent drift is why long-dated, never-touched loans are riskier than they look, and why understanding variable interest rates matters even for a borrower who never plans to actively trade. For the broader cost picture, our borrowing-cost calculator guide breaks down how rates and fees stack up over a loan's life.
The two levers you control both move your liquidation price in your favor:
These are not symmetric in practice. Repaying reduces your debt and your ongoing interest; adding collateral increases your exposure to the asset. Both work, but if you expect more volatility, repaying is usually the cleaner de-risk. Our guide on managing collateral during volatility walks through choosing between them under stress.
| Action | Effect on formula | Effect on liquidation price | Effect on buffer |
|---|---|---|---|
| Interest accrues | Debt (numerator) rises | Rises | Shrinks |
| Partial repayment | Debt (numerator) falls | Falls | Grows |
| Add collateral | Collateral (denominator) rises | Falls | Grows |
| Withdraw collateral | Collateral (denominator) falls | Rises | Shrinks |
| Collateral price drops | Health factor falls toward 1 | Unchanged (price moves toward it) | Shrinks |
The last row is the subtle one. A falling collateral price does not move your liquidation price; it moves the market toward your liquidation price. The liquidation price is a fixed target given your current debt and collateral. The market is the moving object. Keeping these two mentally separate is the difference between calm monitoring and panic.
The formula is universal, but how the trigger fires differs sharply between decentralized protocols and centralized lenders. Knowing which world you are in changes how much warning you get.
On Aave, Morpho, and similar protocols, there is no phone call and no grace period. The instant your health factor touches 1, anyone running a liquidation bot can repay part of your debt and seize the corresponding collateral plus a liquidation bonus. On Aave, up to 50 percent of the debt is typically liquidatable in one go when your health factor is between roughly 0.95 and 1, and up to 100 percent below that, with the exact close factor depending on position size and conditions. On Morpho, the liquidation penalty is derived from the market's LLTV, so a higher-LLTV market carries a smaller bonus but liquidates closer to insolvency.
The practical upshot: in DeFi you must self-monitor, because the protocol will not warn you. There is no human in the loop. Your safeguards are your own alerts and your own buffer.
Centralized lenders run on LTV bands and almost always issue a margin call before liquidating. A representative 2026 structure looks like a series of email or app warnings as LTV climbs, then automated liquidation only at a hard ceiling. One well-known lender, for example, has historically sent margin-call notices at roughly 71.4 percent, 74.1 percent, and 76.9 percent LTV, with automatic loan repayment from collateral triggering near 83.33 percent LTV. Those exact percentages vary by platform and change over time, so treat them as illustrative and read your own loan agreement.
| Dimension | DeFi (Aave, Morpho) | CeFi lender |
|---|---|---|
| Trigger | Health factor = 1 (on-chain) | LTV hits liquidation ceiling |
| Warning | None from protocol; self-monitor | Margin call(s) before liquidation |
| Who liquidates | Permissionless bots | The lender's internal engine |
| Grace to act | Effectively zero | Hours to days, platform-dependent |
| Price source | On-chain oracle | Internal/index price feed |
| Penalty | Liquidation bonus to liquidator | Fees plus possible spread on the sale |
If you want a structured comparison beyond the liquidation mechanics, our explainer on comparing DeFi vs. CeFi lending and the blog on choosing the right Bitcoin loan lay out the broader trade-offs. For what happens after the trigger fires, see what happens if you can't repay.
Here is the detail that separates people who understand liquidations from people who get surprised by them: your position is not measured against the price on your favorite exchange. It is measured against the oracle price the protocol or lender uses, and the two can diverge.
DeFi protocols rely on decentralized oracle networks (Chainlink being the dominant one in 2026) that aggregate prices from many sources and publish an on-chain feed. These feeds update on a heartbeat or a deviation trigger, not continuously, and they are deliberately smoothed to resist manipulation. That has three consequences for your liquidation price:
Warning: Never set your mental liquidation alarm at exactly your oracle liquidation price. Oracle lag, feed smoothing, and the close factor mean liquidations can occur a hair before or after the spot price you are watching crosses your calculated level. Build in a margin so a few seconds of oracle behavior is not the difference between safe and liquidated.
On the CeFi side, the lender uses its own index or reference price, which may differ from any single exchange and is defined in your agreement. The takeaway is identical: calculate your liquidation price from the formula, then assume the actual trigger could come slightly earlier than spot suggests, and keep buffer accordingly.
Calculating the number once is necessary but not sufficient. Because the line drifts with interest and the market moves toward it, monitoring is the real job. Here is a practical regimen.
Put an alert at a price comfortably above your liquidation level so you have time to act. If your liquidation price is $62,500, an alert at $72,000 to $75,000 gives you a meaningful runway to repay or add collateral before the situation is urgent. Stacking two alerts (a "pay attention" and an "act now") works well.
In DeFi, health factor is the cleanest real-time signal because it already bakes in interest accrual and price. Many borrowers treat a health factor of 1.5 as a soft floor for volatile collateral and 2.0+ as comfortable. Our guide on monitoring your crypto loan health and the FAQ on how to monitor loan health cover tooling and alert setups in detail.
Rather than borrowing the maximum, pick a starting LTV whose liquidation drawdown exceeds the worst realistic move for your collateral. If you believe BTC could drop 40 percent in a brutal month, a starting LTV that only survives a 25 percent drop is too hot. Using the reference table, a 50 percent LTV against an 80 percent threshold survives 37.5 percent, which is closer to that stress scenario but still not a guarantee. For volatile assets like SOL, start lower. Our pieces on optimizing your LTV ratio, managing liquidation risk, and the FAQ on how to reduce liquidation risk give concrete frameworks.
Rule of thumb: Size your loan so that even a 30 to 50 percent collateral crash leaves your health factor above 1. For Bitcoin that often means a starting LTV in the 25 to 40 percent range; for more volatile collateral, lower. The cheapest insurance against liquidation is simply borrowing less.
A liquidation price is only useful if you can act when the market approaches it. Hold some stablecoins or spare collateral in reserve so you can repay or top up on short notice. A liquidation often costs you a 5 to 10 percent penalty on the liquidated portion plus the opportunity cost of selling at the bottom; a small pre-positioned reserve usually costs nothing and prevents that outcome.
Let's run one position end to end so every concept connects. You deposit 2 BTC at an assumed $100,000 each ($200,000 collateral) into an 80 percent-threshold market and borrow $90,000 USDC, a 45 percent starting LTV.
Both defensive moves cut the liquidation price by a similar amount, but repaying also stops the interest drift, while adding collateral leaves you more exposed to BTC's price. This is the kind of decision the formula makes legible. For a step-by-step on the mechanics of paying down, see our guide on repaying a crypto loan, and to size the original loan correctly, how much you can borrow.
Common Questions
Liquidation price equals your outstanding debt divided by your collateral amount multiplied by the liquidation threshold (as a decimal). For example, $50,000 of debt against 1 BTC at an 80 percent threshold gives $50,000 / (1 x 0.80) = $62,500 per BTC. The same formula works for ETH, SOL, or any single collateral; only the numbers change. Always use the liquidation threshold, not your maximum borrowing LTV.
