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Liquidations

What is a liquidation?

A liquidation happens when a position's Health Factor falls below 1 — that is, when the value of the collateral, adjusted by the market's liquidation LTV (LLTV), no longer sufficiently covers the debt. This can happen when the collateral falls in price or as borrow interest accrues.

When a position becomes liquidatable, anyone can repay part or all of its debt in exchange for an equivalent amount of the collateral plus the market's liquidation penalty (the liquidator's incentive). Liquidations are open and permissionless, and are typically performed by automated liquidator bots.

Because markets are isolated, a liquidation only ever touches the affected position's own collateral and debt in that one market. It has no effect on your positions in other markets or in SparkLend.

Key parameters

  • Max LTV (LLTV) — the maximum share of collateral value you can borrow. The closer your borrow sits to this limit, the smaller the price move needed to trigger liquidation.
  • Liquidation Penalty — the bonus a liquidator receives, taken from your collateral when your position is liquidated. Both values are shown in the Collateral panel on the market details page.

Monitoring your position

The My position tab shows your Health Factor along with the current price ratio and the liquidation price ratio for the pair. When the market's oracle price reaches your liquidation ratio, your position can be liquidated.

Health Factor, current ratio, and liquidation ratio on the My position tab

How can I avoid being liquidated?

Keep your Health Factor comfortably above 1 — a larger margin gives more room for adverse price moves. You can raise your Health Factor by:

Because crypto prices are volatile and interest accrues over time, an open borrow should be monitored on an ongoing basis.

Where can I read more?

Liquidations in Isolated Markets follow Morpho's liquidation model. For the protocol-level mechanics, including how the liquidation incentive is derived from a market's LLTV, see the Morpho documentation.