Loan-to-Value Ratios and Liquidation Thresholds
Understanding how the Loan To Value ratio (LTV) and the Liquidation Threshold work on JPEG'd is crucial for users to manage their borrowing effectively.
The LTV ratio determines how much a user can borrow against their NFT. For example, if the Base LTV for a collection is 60%, a user can borrow up to 60% of the NFT's value.
Each NFT collection on JPEG'd has a respective Base LTV, which represents the percentage of the NFT's value that can be borrowed against. The Base LTV can be increased up to the Max Boosted LTV by using JPEG Boosts.
This represents the maximum LTV ratio that can be acquired from JPEG Boosts.
Liquidation Thresholds are set at 10% above the Base LTV and Max Boosted LTV of each collection.
If the value of the NFT drops and the positions LTV ratio reaches the Base Liquidation Threshold or the Max Liquidation Threshold, the NFT will be liquidated to cover the debt. Liquidation occurs at 10% beyond the Base LTV ratio up to the Max Liquidation Threshold if boost are applied. Liquidations can be mitigated by using JPEG'd's unique insurance option.
If a user borrows against a Cryptopunk without boosts enabled, and the Base LTV is 60% of the floor's value - liquidation would occur if the LTV reaches 70% (Base Liquidation Threshold).
If a user borrows against a Cryptopunk with the maximum boost amount enabled (+10%), and the Max Boosted LTV is 70% of the floor's value - liquidation would occur if the LTV reaches 80% (Max Liquidation Threshold).
LTV ratio per position can be monitored on the Dashboard/Borrows section. The health bar shows the current distance to liquidation of the position, while the Floor Liquidation Price shows you at which floor price for the collection you would be liquidated.
Monitor the health of you positions by tracking their current LTV, health, and floor price liquidation