Liquidation
Understanding how liquidation works is crucial for both borrowers and investors. This protective mechanism ensures platform stability and investor protection.
Liquidation is a protective process designed to safeguard investors in two scenarios:
Liquidation Triggers
Default
Where the borrower fails to repay their loan
Price liquidation
Triggered if the Bitcoin price falls to a 'Liquidation price' level set for each deal. The threshold for price liquidation is set at 95% of the loan-to-value (LTV) ratio, calculated as the notional amount plus interest, compared to the actual value of the Bitcoin collateral.
Types of Liquidation Methods
There are two types of liquidation methods available for Investors:
Self-liquidation
Investors receive Bitcoin collateral to their designated liquidation address, which they set during the deal setup process.
Your liquidation address cannot be changed later.
Firefish Liquidation
Firefish manages the collateral liquidation process on behalf of the investors, and Investors receive their investment back in bank currency.