What Triggers a Margin Call?

When crypto plummets, many borrowers wonder what asset price or LTV ratio will trigger a margin call or liquidation.

The cryptocurrency market is volatile at times and as a borrower, keeping an eye out for Margin Calls and Liquidations is extremely important. We often receive questions regarding how and what triggers a Celsius loan margin call or forced liquidation, so instead of speculating or assuming, we crunched the numbers.

In this article, we focus on 2 things that will trigger a Celsius loans Margin Call or Liquidation, complete with numbers and examples. Please note: Celsius can change the asset price or LTV that will trigger a margin call or liquidation at any time. The 2 areas of focus include:

  1. % drop in collateral asset price
  2. loan-to-value (LTV) ratio

#1 | How much do asset prices have to drop before I get a Margin Call or Liquidation?

This is a common and great question! Remember that you will only get a margin call or liquidation if your loan collateral asset price declines significantly. This is the case for ALL loan options. Here are the most common questions… essentially the same questions but asked differently:

  • What percentage (%) drop in asset price will trigger a margin call?
  • What % drop in asset price will trigger a forced liquidation?
  • How much do asset prices need to decline before I get a margin call?
  • How much does my loan collateral have to decrease before I get liquidated?

Well, we did a couple of loan applications (one with BTC and another with ETH as the loan collateral) and came out with almost exactly the same numbers. So here they are…

Example A: Using Bitcoin (BTC) as Loan Collateral

The price of Bitcoin (BTC) was $48,950 at the time of loan application.

APRMargin Call% DropLiquidation% Drop
1%$18,837.6961.52%$15,305.6268.73%
6.95%$24,865.7549.20%$20,203.4258.73%
8.95%$37,675.3823.03%$30,611.2537.46%
See bottom of page for screenshots of loan application process
Example B: Using Ethereum (ETH) as Loan Collateral

The price of Ethereum (ETH) was $3,175.15 at the time of loan application.

APRMargin Call% DropLiquidation% Drop
1%$1,221.2161.54%$992.2368.75%
6.95%$1,611.9949.23%$1,309.7458.75%
8.95%$2,442.4223.08%$1,984.4637.50%
See bottom of page for screenshots of loan application process

CONCLUSION:

From our 2 above example loan applications, it’s clear how much loan collateral asset prices need to drop before a Margin Call or Forced Liquidation occurs.
For 1% APR / 25% LTV loans > Margin Call occurs when there is a ~61.50% drop in price; Liquidation occurs when there is a ~68.75% drop in price.
For 6.95% APR / 33% LTV loans > Margin Call occurs with a ~49.25% drop; Liquidation occurs with a ~58.75% drop.
For 8.95% APR / 50% LTV loans > Margin Call occurs when there is a ~23.00% drop in price; Liquidation occurs with a ~37.50% drop.
As you can see, the ‘riskier’ the loan (higher APR and LTV), the lower the asset price drop needs to be to trigger a margin call and/or liquidation.

#2 | What Loan-to-Value (LTV) ratio will trigger a Celsius Margin Call or Liquidation?

Instead of looking at the underlying price of the loan collateral, we can also analyze the Loan-to-Value (LTV) ratio in order to determine what triggers a Celsius Margin Call or Forced Liquidation. We can do so by calculating how much the loan collateral is worth at the time of a margin call trigger or liquidation.

We applied for a couple of loans (one with BTC and another with ETH as the loan collateral) and crunched the numbers. We have to consider the original amount of collateral required for each loan option in this case:

APRLTVCollateral RequiredLoan Amount
1%25%$2,000$500
6.95%33%$1,500$500
8.95%50%$1,000$500
Example C: Using Bitcoin (BTC) as Loan Collateral

The price of Bitcoin (BTC) was $48,950 at the time of loan application. This was based on a $500 stablecoin loan.

APRCollateral Value
(Margin Call)
LTVCollateral Value
(Liquidation)
LTV
1%$769.6764.96%$625.3679.95%
6.95%$769.6764.96%$625.3679.95%
8.95%$769.6764.96%$625.3679.95%
See bottom of page for screenshots of loan application process
Example D: Using Ethereum (ETH) as Loan Collateral

The price of Ethereum (ETH) was $3,175.15 at the time of loan application. This was based on a $500 stablecoin loan.

APRCollateral Value
(Margin Call)
LTVCollateral Value
(Liquidation)
LTV
1%$769.2365.00%$625.0080.00%
6.95%$769.2365.00%$625.0080.00%
8.95%$769.2365.00%$625.0080.00%
See bottom of page for screenshots of loan application process

CONCLUSION:

You can see clearly from the above numbers that regardless of loan collateral asset type or original loan APR/LTV options, both the Margin Call and Liquidation LTVs are exactly the same.
A LTV of ~65% will trigger a Margin Call while a LTV of 80% will trigger a Forced Liquidation.

Adjusting Your Celsius Loan LTV

There are 2 ways to adjust your Celsius crypto-loan LTV (loan-to-value). These include:

  1. Increase your LTV if your loan collateral asset price decreases (Margin Call or Liquidation notification)
  2. Decrease your LTV if your loan collateral asset price increases (Reverse Margin Call)
1 | Margin Call & Increasing Your LTV

In the case of a Margin Call, you must contact the Celsius Loan Team in order to ‘top-up’ or add more collateral to your loan. This will effectively increase your loan-to-value back to a % that is acceptable under the terms and conditions of your loan.

If the Celsius Loan Team sends you a margin call email, you can simply respond to it by replying to the email. On the other hand, if you don’t receive an email and/or what to be proactive in increasing your loan-to-value ratio, then you can simply email loans@celsius.network with your request.

You can request an increase to your LTV in 2 ways:

  1. Adding a specific amount of loan collateral (ie. xxx BTC)
  2. Increasing your LTV to a specific % (ie. 25% LTV or 30% LTV). The Celsius Loans Team will tell you how much loan collateral it will require.
2 | Reverse Margin Call & Decreasing Your LTV

In the case that your loan collateral asset price has increased, a Celsian can request a Reverse Margin Call. This is a loan refinancing option where a borrower can ‘rebalance’ their loan-to-value ratio to a more suitable level. You can request a Reverse Margin Call once per month per loan (not per account, as we understand).

If you would like to request a reverse margin call for your crypto loan, please contact the Celsius Loans Team via email at loans@celsius.network.

Loan Application Screenshots

Bitcoin (BTC)

Ethereum (ETH)