How does loan to value (LTV) affect the borrowing capacity in the cryptocurrency market?

1 answers

• lisaSep 23, 2021 · 4 years ago
  When it comes to borrowing in the cryptocurrency market, loan to value (LTV) plays a crucial role in determining the borrowing capacity. LTV represents the percentage of the loan amount compared to the value of the collateral. The higher the LTV ratio, the more borrowing capacity a borrower has. This means that borrowers can access a larger amount of funds relative to the value of their collateral. However, it's important to note that a higher LTV ratio also increases the risk for both the borrower and the lender. If the value of the collateral drops significantly, the borrower may face liquidation or margin calls, while the lender may not be able to recover the full loan amount. Therefore, it's essential for borrowers to carefully consider the LTV ratio and assess their risk tolerance before borrowing in the cryptocurrency market.
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