Loan-to-Value Ratio: What It Means and How It Affects Crypto Loans

When you borrow crypto using your digital assets as collateral, the loan-to-value ratio, a metric that compares the size of a loan to the value of the asset backing it. Also known as LTV ratio, it tells lenders how much risk they’re taking when you borrow against your Bitcoin, Ethereum, or other tokens. If your LTV is 50%, that means you can borrow up to half the value of what you put up as collateral. It’s not just a number—it’s the line between getting funded and getting liquidated.

Most DeFi platforms and centralized crypto lenders use LTV ratios to protect themselves. If the value of your collateral drops too far, your loan becomes too risky. That’s when the system triggers a margin call—or worse, automatically sells your assets to cover the loan. Platforms like Aave and Celsius (before it collapsed) used LTV thresholds to decide when to act. In 2022, when Bitcoin dropped 60%, thousands of borrowers got liquidated because their LTV crossed 80% or 90%. That’s why savvy users keep their LTV under 50%—even if they’re allowed to go higher.

It’s not just about crypto either. The same concept applies to tokenized stocks like COSTon, a blockchain-based version of Costco stock, or gold-backed tokens like DIGAU, a security token backed by physical gold reserves. If you use those as collateral, lenders still check the LTV. The asset might be different, but the math stays the same. Even in traditional finance, banks use LTV for mortgages. Crypto just made it faster, less regulated, and more volatile.

What you’ll find below are real-world examples of how LTV plays out in crypto. Some posts show how exchanges like BKEX and BitStorage let you borrow—but don’t warn you about liquidation risks. Others explain how DeFi protocols set LTV limits to stay safe. You’ll also see how regulatory changes, like MiCA in Europe, are starting to require clearer LTV disclosures. Whether you’re using crypto as collateral or just trying to understand why your loan got wiped out, these stories show what happens when LTV ratios go wrong—and how to avoid it.