Liquidation
Liquidation is the forced sale of your collateral when its value falls below what your loan requires. A liquidator repays part of your debt and takes your
Liquidation is the forced sale of your collateral when its value falls below what your loan requires. A liquidator repays part of your debt and takes your collateral at a discount — automatically, with no warning call from a bank.
Why it matters
Liquidation is the guillotine under all DeFi leverage: in a fast crash, cascades of liquidations push prices lower, triggering more liquidations. Keep a healthy collateral ratio, watch your “health factor,” and never borrow against the full value of volatile assets.
Related terms
collateral · DeFi ·
stablecoin