LLTV is the level at which the platform closes a borrower's position to protect investor capital before the loss reaches the pool.
🤩 On 8lends, this level is fixed at 80%.
Here's an example:
A borrower provides $10,000 in BTC and takes out a USDC loan.
With an 80% LLTV, the maximum loan amount is $8,000.
The debt-to-collateral (LTV) ratio at the time of disbursement is below the ceiling, usually closer to 60–70% to allow for price movement.
What happens when the price drops:
If BTC dips and the value of the collateral drops to the point where the current debt is 80% of the new value of the collateral, the platform sells some or all of the collateral, closes the debt, and returns USDC to the pool for investors.
This happens before the collateral no longer covers the loan.
Why 80% and not higher?
A higher level, for example 95%, would give the borrower more flexibility over the loan amount, but would sharply limit the volatility buffer.
BTC and ETH can lose 10–15% in a single day. With an LLTV of 95%, such a drop almost immediately pushes the position beyond the
level where the debt is no longer fully covered by the collateral, leaving the platform no time to sell the asset without incurring a loss for the pool.
Why not lower the level, for example to 50%?
Such a level would be overly conservative: the borrower would only be able to borrow half the value of the collateral, which dramatically reduces the capital efficiency of crypto lending and makes it less attractive to large BTC and ETH holders.
80% is a balance between how much the borrower can borrow against the collateral and how much time and price space the system has to react before the loss affects the investor's capital.
🤩 See it live and try it yourself: app.8lends.io/lend