55 sats \ 2 replies \ @OT 11 Jul \ on: You've hodled long enough. Start living. bitcoin
Is this how it works? I lock up collateral to buy a computer. Let's say 2m sats. Lendasat buys it for me and I can pay it back at a later date when Bitcoin is worth more in USD terms. So when Bitcoin is 100k I can pay back 1.2m sats + your fee to get my collateral back.
What's the liquidation point? When LTV hits 80%? 90%?
The liquidation point is reached once the collateral is not able to cover for the original principal + interests anymore.
Lets assume a LTV ratio of 67% and a loan of $5,000 at the market price of $65,000. You'd have to put up a collateral of $7,500 or 0,1154 btc.
If the price drops to $43,333, the collateral of 0,1154 would have reach an equal value of the original principal ($5,000), thus the liquidation point is reached.
This simple example ignores any fees and interest to be paid, what would change the liquidation price.