Crypto Loan-to-Value (LTV) Ratio Guide

What is the LTV Ratio in Crypto Lending?

The Loan-to-Value (LTV) ratio measures how much you can borrow relative to your collateral value. It's the fundamental metric determining loan size and liquidation risk.

LTV Formula

LTV = (Loan Amount / Collateral Value) × 100%

Simple Example

• Collateral: $10,000 worth of Bitcoin
• Loan: $5,000 USDT
• LTV: ($5,000 / $10,000) × 100% = 50%

Why LTV Matters

• Determines Loan Size: Higher LTV = more borrowing capacity
• Affects Liquidation Risk: Higher LTV = closer to liquidation
• Impacts Interest Rates: Some platforms charge more for higher LTV
• Reflects Risk Level: Lower LTV = safer position

Understand collateral basics in our collateral guide.

How to Calculate LTV Ratio

Step-by-Step Calculation

Step 1: Determine Collateral Value

Example: 2 ETH at $2,500 each

• Collateral Value = 2 × $2,500 = $5,000

Step 2: Determine Loan Amount

You want to borrow $2,000 USDT

Step 3: Calculate LTV

LTV = ($2,000 / $5,000) × 100% = 40%

Reverse Calculation: Maximum Loan

If the platform offers 50% max LTV:

• Collateral: $10,000
• Max Loan: $10,000 × 50% = $5,000

Dynamic LTV Changes

Price Increase Scenario

• Initial: $10,000 collateral, $5,000 loan = 50% LTV
• ETH +20%: $12,000 collateral, $5,000 loan = 41.7% LTV
• Result: LTV improves, safer position

Price Decrease Scenario

• Initial: $10,000 collateral, $5,000 loan = 50% LTV
• ETH -20%: $8,000 collateral, $5,000 loan = 62.5% LTV
• Result: LTV worsens, approaching liquidation

Interest Impact on LTV

Loan value increases over time due to interest:

• Month 1: $5,000 loan at 8% APR
• Month 6: $5,200 loan (with interest)
• LTV Change: 50% → 52% (if collateral stable)

Platform LTV Limits

CeFi Platform LTV Ratios

Nexo

• Bitcoin: Up to 50% LTV
• Ethereum: Up to 50% LTV
• Stablecoins: Up to 90% LTV
• Altcoins: 20-33% LTV
• Liquidation: Varies by tier and asset

Crypto.com

• Bitcoin/Ethereum: Up to 50% LTV
• Stablecoins: Up to 50% LTV
• Other Assets: 25-40% LTV

YouHodler

• Bitcoin: Up to 70% LTV
• Ethereum: Up to 70% LTV
• Stablecoins: Up to 90% LTV
• Note: Higher LTV = higher risk

DeFi Protocol LTV Ratios

Aave

• Bitcoin (WBTC): 70% max LTV, 75% liquidation
• Ethereum: 80% max LTV, 82.5% liquidation
• Stablecoins: 75-80% max LTV
• E-Mode: Up to 97% LTV for correlated assets

Compound

• Bitcoin (WBTC): 70% collateral factor
• Ethereum: 82.5% collateral factor
• Stablecoins: 75-85% collateral factor

MakerDAO

• ETH-A: 170% min collateral (58.8% max LTV)
• WBTC-A: 175% min collateral (57.1% max LTV)
• USDC-A: 101% min collateral (99% max LTV)

Understanding Liquidation Thresholds

Liquidation threshold is always higher than max LTV:

• Max LTV: Maximum you can borrow initially
• Liquidation Threshold: LTV at which liquidation triggers
• Buffer: Difference between max and liquidation

Example (Aave ETH):

• Max LTV: 80%
• Liquidation: 82.5%
• Buffer: 2.5% (very small!)

Optimal LTV Ratios for Safety

Conservative LTV Recommendations

By Asset Volatility

• Bitcoin (Low Volatility): 30-40% LTV
• Ethereum (Moderate): 25-35% LTV
• Major Altcoins (High): 20-30% LTV
• Stablecoins (None): 70-80% LTV

By Risk Tolerance

• Conservative: 20-30% LTV (large buffer)
• Moderate: 30-40% LTV (balanced)
• Aggressive: 40-50% LTV (higher risk)
• Dangerous: 50%+ LTV (not recommended)

LTV Strategy by Market Conditions

Bull Market

• Strategy: Can use slightly higher LTV (40-50%)
• Reason: Collateral likely to appreciate
• Caution: Bull markets end suddenly

Bear Market

• Strategy: Use very low LTV (20-30%)
• Reason: Collateral likely to depreciate
• Safety: Large buffer protects from crashes

High Volatility

• Strategy: Minimize LTV (20-25%)
• Reason: Rapid price swings increase risk
• Alternative: Use stablecoin collateral

LTV Optimization Examples

Example 1: Conservative Bitcoin Loan

• Collateral: 1 BTC at $50,000
• Target LTV: 30%
• Loan Amount: $15,000
• Liquidation Buffer: 40-50% price drop before liquidation

Example 2: Moderate Ethereum Loan

• Collateral: 10 ETH at $2,500 = $25,000
• Target LTV: 35%
• Loan Amount: $8,750
• Liquidation Buffer: 35-45% price drop

Example 3: Stablecoin Efficiency

• Collateral: $50,000 USDC
• Target LTV: 75%
• Loan Amount: $37,500
• Risk: Minimal (stablecoin depeg only)

LTV Management Strategies

Monitoring Your LTV

Daily Checks

• Check current LTV on platform dashboard
• Compare to your target safe LTV
• Note distance to liquidation threshold
• Track collateral price trends

Alert Setup

• Warning Level: LTV reaches 45% (if target is 35%)
• Action Level: LTV reaches 50%
• Critical Level: LTV reaches 55%

Improving Your LTV

Method 1: Add Collateral

Current: $10,000 collateral, $5,000 loan = 50% LTV

Add $2,000 collateral:

• New collateral: $12,000
• New LTV: $5,000 / $12,000 = 41.7%
• Improvement: 8.3 percentage points

Method 2: Repay Loan

Current: $10,000 collateral, $5,000 loan = 50% LTV

Repay $1,000:

• New loan: $4,000
• New LTV: $4,000 / $10,000 = 40%
• Improvement: 10 percentage points

Method 3: Combination

• Add $1,000 collateral
• Repay $500 loan
• New LTV: $4,500 / $11,000 = 40.9%

LTV Rebalancing Schedule

Monthly Rebalancing

• Review LTV on 1st of each month
• If above target, add collateral or repay
• If well below target, consider borrowing more

Event-Based Rebalancing

• After 10% Price Drop: Check and adjust
• After 20% Price Drop: Immediate action
• After Profit Taking: Repay portion of loan

Advanced LTV Strategies

Laddered LTV Approach

Split collateral across multiple loans with different LTV ratios:

• Loan 1: 30% LTV (ultra-safe)
• Loan 2: 40% LTV (moderate)
• Loan 3: 50% LTV (aggressive)
• Benefit: Diversified risk, partial liquidation only

Dynamic LTV Adjustment

• Bull Market: Gradually increase LTV to 45-50%
• Bear Market: Reduce LTV to 25-30%
• Sideways: Maintain moderate 35-40%

Learn protection strategies in our liquidation protection guide.

Psychology of LTV Management

Emotional Decision-Making Traps

Understanding psychological factors helps maintain disciplined LTV management during market volatility.

Common Psychological Mistakes

• Greed During Bull Markets: Borrowing at maximum LTV when prices rise, assuming they'll continue. This leaves no buffer for inevitable corrections.
• Fear During Bear Markets: Panic-closing positions at losses instead of adding collateral. Often results in realising losses unnecessarily.
• Overconfidence Bias: Believing "this time is different" and ignoring historical volatility patterns. Markets always revert to volatility eventually.
• Anchoring to Entry Price: Refusing to adjust strategy when market conditions change fundamentally.

Disciplined LTV Framework

Rule-Based Approach

Remove emotions by following predetermined rules:

• Maximum LTV Rule: Never exceed 50% LTV regardless of market sentiment
• Rebalancing Rule: Add collateral when LTV exceeds 45%, no exceptions
• Profit-Taking Rule: Repay 20% of loan when collateral appreciates 30%+
• Emergency Rule: Close position if unable to maintain safe LTV for 30+ days

Stress Testing Your LTV

Before borrowing, test your strategy against historical scenarios:

• 50% Crash Scenario: Can you survive if collateral drops 50% in one month?
• Extended Bear Market: Can you maintain a position for 12-18 months of decline?
• Black Swan Event: Do you have emergency funds for 70%+ crash?

If you can't confidently answer "yes" to all three, reduce your LTV or loan size. Conservative positioning prevents forced liquidations during the worst market conditions.

Affiliate Disclosure: This article contains referral links to crypto lending platforms. We may earn a commission if you sign up through our links, at no additional cost to you. We only recommend platforms we have researched and believe offer genuine value to our readers.

Frequently Asked Questions

What is the LTV ratio in crypto lending?

LTV (Loan-to-Value) ratio is the percentage of your collateral value that you can borrow. Formula: (Loan Amount / Collateral Value) × 100%. For example, borrowing $5,000 against $10,000 collateral = 50% LTV. Lower LTV means a safer position.

What is a safe LTV ratio for crypto loans?

Conservative safe ratios: Bitcoin 30-40%, Ethereum 25-35%, Altcoins 20-30%. This provides a 30-50% buffer before liquidation. Never exceed 50% LTV on volatile assets. Stablecoins can safely use 70-80% LTV

What's the difference between max LTV and liquidation threshold?

Max LTV is the maximum you can borrow initially. The liquidation threshold is the LTV at which your position is liquidated. Example: Aave ETH has 80% max LTV but liquidates at 82.5%. The 2.5% difference is your safety buffer.

How do I calculate my current LTV?

Current LTV = (Current Loan Value / Current Collateral Value) × 100%. Check your platform dashboard for real-time values. Remember that both the loan (due to interest) and the collateral (due to price changes) have constantly changing values.

What happens if my LTV gets too high?

If your LTV reaches the liquidation threshold, your collateral gets automatically sold to repay the loan. You lose your collateral, plus a liquidation penalty of 5-15%. To prevent this, add collateral or repay the loan when the LTV approaches the danger zone.

Can I borrow more if my LTV is low?

Yes, if your LTV is below the maximum allowed, you can borrow more. Example: 30% current LTV with 50% permitted max means you can borrow an additional 20% of collateral value. However, consider keeping a buffer for safety.

How does price volatility affect LTV?

Collateral price drops increase your LTV (more dangerous). Price increases decrease your LTV (a safer approach). Example: A 20% drop in collateral price can change a 40% LTV to a 50% LTV. This is why conservative LTV ratios are crucial for volatile assets.

Should I use the maximum LTV offered by platforms?

No, never use maximum LTV. Platforms offer high LTV to attract users, but it's a hazardous approach. If the platform offers a maximum LTV of 70%, use only 35-40% for safety. The extra borrowing capacity isn't worth the risk of liquidation.

Sources & References

• Compound. (2025). Compound Collateral Factors. LTV calculations and borrowing limits.
• Aave. (2025). Aave Risk Parameters. Official documentation on LTV ratios and liquidation thresholds.
• MakerDAO. (2025). MakerDAO Whitepaper. Collateralization ratios and stability mechanisms.
• Aave. (2025). Aave LTV Parameters. Loan-to-value ratios and risk management.
• Nexo. (2025). Nexo LTV Guide. CeFi platform LTV requirements and tiers.