What Is Loan-to-Value (LTV), and Why Does It Matter?

A Ratio That Shapes Every Loan

Loan-to-value describes the relationship between what you borrow and the market value of the collateral securing it. Borrow $40,000 against $100,000 of digital assets and your LTV is 40%. It is a single number, but almost every other feature of a crypto-backed loan follows from it.

Lenders set a maximum starting LTV for each asset. More liquid, less volatile assets are generally given a higher ceiling, while thinner markets are treated more conservatively. That ceiling defines your borrowing capacity for a given amount of collateral.

Why LTV Moves Even When You Do Nothing

Your loan balance is largely fixed, but the value of your collateral is not. When prices fall, the same balance now represents a larger share of the collateral, so LTV rises. When prices recover, LTV falls again. This is why loan health is monitored continuously rather than checked once at origination.

A useful exercise is to ask how far the market would need to fall before your LTV reached the margin call threshold. At a 40% starting LTV with a 75% threshold, collateral would need to lose roughly 47% of its value. At 65%, the same threshold is reached after a fall of about 13%.

Choosing a Starting LTV

• A lower LTV means less capital today but a wider buffer against volatility.
• A higher LTV maximises liquidity but leaves little room before you may need to act.
• Your ability to add collateral or repay quickly should inform how close to the maximum you go.
• Longer terms generally warrant more conservative ratios, since more can change over time.

The maximum LTV tells you what is possible. Your circumstances tell you what is sensible.

Keeping LTV Where You Want It

You can lower your LTV at any time by adding collateral or making a repayment. Some borrowers set a personal alert well below the lender’s threshold so they have time to respond calmly rather than under pressure. Treating LTV as something you manage, not just something you are given, is one of the simplest ways to borrow more safely.

This article is for general informational purposes only and does not constitute financial, investment, legal, or tax advice. Digital assets are volatile, and borrowing against them involves risk. Loan availability and final terms are subject to eligibility, underwriting, and market conditions.