Loan-to-Value Ratio (LTV)
The ratio of a loan’s value to the value of its collateral in DeFi lending.
What is Loan-to-Value Ratio (LTV)?
LTV measures the loan amount relative to collateral value, expressed as a percentage. For example, an LTV of 66.7% allows borrowing $1,000 against $1,500 in ETH. Protocols set LTV caps (typically 50–80%) to ensure overcollateralization. Aave’s v3 markets in 2025 offer LTVs up to 75% for stable assets like USDC, while volatile assets like BTC have lower caps.
LTV determines borrowing capacity and liquidation risk. If collateral value drops, pushing LTV above the cap (e.g., 80%), liquidation is triggered. In 2024, protocols adjusted LTV dynamically for volatile assets, reducing liquidations by 15% during market swings.
Related Terms
IMF Stablecoin Guidance
International Monetary Fund's recommendations on regulating stablecoins to balance innovation with risks in global finance.
Double Spend
Attempting to spend the same digital asset more than once in a blockchain network.
Option Value (MSTR)
The premium paid for an option contract, reflecting intrinsic and time value.
Thick Market/Thin Market
A thick market has many participants trading high volumes, ensuring robust information aggregation; a thin market has few participants and low volumes, risking inaccurate predictions.
Web Content Monetization
Generating revenue from digital content using standardized payment protocols.
NAV
Net Asset Value - the per-share value of an investment fund's assets minus liabilities, calculated daily to determine share prices.