How to Use LTV in Crypto Trading Without Getting Liquidated

In the crypto world, LTV (Loan-to-Value) is a key figure that you cannot ignore in trading. It may seem like just a ratio, but it actually determines the safety of your funds. Many novices leverage too much during a bull market, setting the LTV too high, and as a result, they get liquidated once the market turns. To survive in the crypto world for the long term, understanding and correctly using LTV is far more important than short-term gains.

The basic logic of LTV

LTV represents the ratio of the funds you lend out to the value of the collateral. For example, if you borrow $400 against an ETH with a collateral value of $1000, the LTV would be 40%.

• The higher the LTV: it means more borrowing, greater leverage, and higher potential risks;
• The lower the LTV: the lower the risk, but also less available funds.

Most platforms will set several key intervals:

• Safety Zone: LTV ≤ 50%, lower risk;
• Caution zone: LTV about 60%-75%, price fluctuations may trigger margin calls;
• Danger Zone: LTV ≥ 80%, easily subject to liquidation.

Understanding these intervals can help you assess your current risk position.

Crypto world practical experience: How does LTV affect your position?

In DeFi or CeFi lending platforms, LTV determines the leverage ratio you can use.

• When the LTV is low, you still have ample collateral space.
• When the LTV increases, it means that the price of your collateral asset may decline, interest accumulation may rise, or borrowing may expand.

Assuming you collateralize 1 BTC (priced at 60,000 USD) to borrow 30,000 USD worth of USDT, LTV = 50%.

If BTC falls to 50,000 USD, then your LTV will rise to 60%.

If it falls to $40,000, the LTV will reach 75%, close to the liquidation line.

This change often occurs within a short period of time, and if there is no time to replenish positions, it may lead to automatic liquidation.

Three common reasons for liquidation

• Over-leveraging: Many newcomers see high-yield liquidity mining projects and choose to borrow more assets with a high LTV to participate. However, once the market reverses and the collateral price drops, the system automatically liquidates, resulting in significant losses.
• Ignoring the dual impact of interest and volatility: borrowing is not static. Interest continues to accumulate, and the prices of crypto assets fluctuate wildly. The combination of both can cause the LTV to quietly rise, and even if you do not take on new loans, it may trigger liquidation.
• Platform adjustment rules: Some platforms may temporarily adjust risk parameters, such as lowering the allowed maximum LTV or raising the liquidation line. If your LTV is already at a critical point, rule changes may cause you to “explode” instantly.

Latest Market Case: Chain Reaction of LTV During the Crash

The market crash in early October 2025 is a typical manifestation of LTV risk. Many users adopted high LTV collateralization models on DeFi platforms, and the market downturn triggered a chain of liquidations. Several lending protocols liquidated billions of dollars in assets in a short period, even leading to liquidity crises in some stablecoin pools.

Another typical example is the “circular borrowing” mechanism of a certain stablecoin project: users collateralize USDe to borrow USDC, then exchange it back for USDe to continue collateralizing, magnifying returns through multiple layers of leverage. It seems stable, but the risk is extremely high. When the market value of USDe declines, each layer of leverage will cause the LTV to skyrocket, and the liquidation chain collapses instantly.

These cases prove that while LTV is a technical parameter, it determines who can survive during extreme market fluctuations.

How to Safely Control LTV in Practice

• Control within a safe range: It is recommended that beginners keep the LTV within 40%-50%. This way, even if the coin price drops by 20%-30%, there will still be enough buffer space.
• Set up warning lines and automatic replenishment functions: Some platforms support “automatic replenishment” or “risk warning notifications”; be sure to enable them. Detecting problems in advance can avoid passive liquidation.
• Regular interest repayment or partial repayment: Do not underestimate the accumulation of interest. Regularly repaying part of the loan can reduce the LTV and extend the holding period.
• Choose mainstream coins with strong liquidity for collateral: Use mainstream assets such as BTC, ETH, USDT as collateral to reduce the liquidation risk caused by severe price fluctuations.
• Beware of high-yield temptations: Some projects attract users with slogans like “high LTV, high yield,” but often have weak risk control. Beginners should avoid participating in overly leveraged projects.
• Pay attention to market sentiment and volatility cycles: during periods of extreme optimism in the market, it is often a time of risk accumulation. Appropriately lowering the LTV can help preserve the principal during downturns.

Summary: A low LTV is truly stable.

• LTV (Loan-to-Value) is a key indicator for measuring leverage risk, representing the ratio of the loan amount to the value of the collateral.
• High LTV means high risk, and it is easy to be liquidated during price fluctuations; low LTV provides you with a stronger margin of safety.
• In the practical operations of the crypto world, maintaining an LTV between 40% and 50% is the most stable strategy for beginners.
• When faced with the temptation of high returns, remember: in a highly volatile market, safety is more important than profit.

If profit relies on opportunity, then survival depends on risk control. Among all risk control indicators, LTV is the most intuitive and practical one. Only by understanding it, monitoring it, and controlling it can you truly grasp the survival rules of the crypto world.