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DeFi Health Factors, LTV and Liquidations: A Practical Guide

A clear, data-driven guide to defi health factors, ltv and liquidations.

LTV versus liquidation threshold

On Aave v3, ETH has a maximum LTV near 80.5 percent and a liquidation threshold near 83 percent. LTV caps how much you can borrow; the threshold decides when you can be liquidated.

Health factor

HF = Σ(collateral × threshold) ÷ debt. With $10,000 ETH and $5,000 USDC debt, HF = 10,000 × 0.83 ÷ 5,000 = 1.66. Liquidation is allowed at HF below 1.

Liquidation mechanics

Liquidators repay up to 50 percent of the debt and receive collateral plus a bonus, typically 5 percent for ETH. If HF falls below 0.95, Aave v3 allows 100 percent close factor.

Price trigger

The ETH price drop that triggers liquidation is 1 − 1/HF; at HF 1.66, about 40 percent. Use oracles' prices from Chainlink, not DEX prices, when estimating.

Looping

Borrowing ETH against stETH and restaking multiplies yield: net APY = (stake yield − borrow APR × LTV) ÷ (1 − LTV). E-mode raises LTV for correlated assets to around 93 percent but increases sensitivity to depegs.

By the numbers

For DeFi Health Factors, LTV and Liquidations, the reference figures are topic of DeFi Health Factors, LTV and Liquidations, level of Intermediate, updated of 2026. The comparison table below lines up collateral, debt, hf, liq. drop — $10,000: $3,000 / 2.77 / 64%; $10,000: $5,000 / 1.66 / 40%; $10,000: $7,000 / 1.19 / 16%.

Modeling DeFi Health Factors, LTV and Liquidations with the Lending Health Factor Liquidation Calculator

The Lending Health Factor Liquidation Calculator takes three inputs — Collateral ($), Liq. threshold (%), Debt ($). Health factor = collateral × LT ÷ debt. With its default inputs (Collateral ($) = 10000; Liq. threshold (%) = 82; Debt ($) = 5000) it returns 1.64 HF; swap in the figures from DeFi Health Factors, LTV and Liquidations above to reproduce the scenario yourself.

Modeling DeFi Health Factors, LTV and Liquidations with the Recursive Looping Leveraged Staking Calculator

The Recursive Looping Leveraged Staking Calculator takes three inputs — Stake APY (%), Borrow APR (%), LTV (%). Net APY = (stake − borrow × LTV) ÷ (1 − LTV). With its default inputs (Stake APY (%) = 3.5; Borrow APR (%) = 2.5; LTV (%) = 75) it returns 6.5 %; swap in the figures from DeFi Health Factors, LTV and Liquidations above to reproduce the scenario yourself.

Data Table

For educational and informational purposes only. Not financial, investment, tax or legal advice. Figures are approximate and historical; crypto assets are volatile and you may lose capital. Do your own research.