When you use crypto as security for a loan, the most important number to monitor is your Loan to Value Ratio (LVR). This document explains how LVR works in the context of crypto-backed lending and what your options are throughout the life of the loan.
What is LVR?
LVR is the active balance of your loan expressed as a percentage of the value of your security (your crypto). At the start of your loan, the LVR is set at ~40%.
LVR = (Outstanding Balance / Bitcoin Value) x 100
Managing fluctuations
Because the value of crypto changes, your LVR will fluctuate. You can add more crypto to your loan or repay in cash to keep your ratio healthy.
Your status is categorised as follows:
Healthy: Under 50%
Attention: 50% - 54%
Warning: 55% - 59%
Default Notice: Over 60%
Default grace period
If your loan reaches 'Default' status (> 60% LVR) you’ll be notified and you have 30 days to reduce the LVR to 55% or less before any forced repayment action is taken.