LTV Ratio: What It Is and Why It Matters in Crypto and DeFi

When you borrow crypto using your holdings as collateral, the LTV ratio, the percentage of a loan compared to the value of the collateral backing it. Also known as loan-to-value ratio, it’s the single most important number determining whether you stay in a position—or get liquidated. If you put up $10,000 in ETH and borrow $7,000, your LTV is 70%. That’s the line between safety and risk.

Most DeFi platforms like Aave or Compound set max LTVs between 50% and 80%. Why? Because crypto prices swing fast. If ETH drops 20% and your LTV hits 85%, the protocol automatically sells part of your collateral to cover the loan. That’s a liquidation—and it’s not a bug, it’s the system working. The lower your LTV, the more room you have before trouble hits. Platforms like ProBit and EarnBit don’t lend directly, but they’re where traders often move funds after getting liquidated elsewhere. Meanwhile, projects like Bunicorn and Sphynx Network rely on LTV rules to keep their lending pools stable. Even airdrop hunters need to understand this: if you’re staking tokens to qualify, your collateral usage affects your risk exposure.

It’s not just about borrowing. LTV also reveals how risky a protocol is. A platform letting users borrow at 90% LTV? That’s playing with fire. One big price drop, and half the users get wiped out. That’s why SoupSwap and IslandSwap are red flags—they lack transparency around collateral rules. If you can’t find their LTV limits, assume they’re unsafe. In contrast, FCA-registered exchanges and audited DeFi apps clearly state their LTV caps because they’re built to last. Even in places like Nigeria or Cuba, where crypto is used to bypass banks, users who understand LTV avoid losing everything in a market dip.

Think of the LTV ratio like a seatbelt in a car. You don’t need it until something goes wrong. But when it does, the difference between walking away and ending up in the hospital is that one simple number. In crypto, where volatility is normal, your LTV is your safety net. The posts below show you how real users got burned—or saved—by this rule. Some lost everything on over-leveraged positions. Others used low LTVs to ride out crashes. You’ll see how NFT airdrops like SHF and Lepasa Polqueen tie into this too: if you borrow to buy into them, your LTV determines if you survive the hype cycle. This isn’t theory. It’s survival.