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Borrowing

Liquidation

Liquidation is what protects the USDC you borrowed: if your collateral falls far enough in value, part of it can be sold to repay part of your loan. It is automatic, it is on-chain, and it costs you money. This page explains when it happens and how to stay clear of it.

When a loan can be liquidated

A loan can be liquidated as soon as its LTV reaches its liquidation LTV. With one collateral asset, that is the asset’s liquidation LTV; with several, it is their value-weighted blend.

liquidatable when debt ≥ Σ (collateral value × liquidation LTV)

Your LTV can reach that point in two ways: your collateral falls in price, or your debt grows as interest accrues. Price is almost always the reason.

Your liquidation price

For each collateral asset, the dashboard shows the share price at which your loan would become liquidatable, holding everything else constant.

liquidation price = (debt − other collateral’s liquidation value) ÷ (shares × liquidation LTV)

Example. You deposit 10 SPYx at $775 ($7,750) and borrow $3,000. With a liquidation LTV of 75%, the liquidation price is 3,000 ÷ (10 × 0.75) = $400 per share — a drop of about 48% from today.

What happens in a liquidation

Liquidators — independent bots watching every loan — repay part of your debt and receive an equivalent value of your collateral plus a liquidation bonus set by Kamino. That bonus is your loss. Only part of a loan is liquidated at a time, enough to bring it back to safety; a deeper fall can trigger further liquidations.

How to stay clear

  • Borrow less than you can. The further your LTV sits below the max, the more a price drop it can absorb. The dashboard tells you how far prices could fall before liquidation.
  • Watch your health bar. It shows today’s LTV against the max and the liquidation point. Yellow means close to the max.
  • Act early. Repay part of the loan or deposit more collateral before the liquidation point, not at it. Both take effect in seconds.
  • Spread your collateral. Several xStocks are less likely to fall together than one.