Captain’s note
- Coinbase defines LTV as the total outstanding loan, including accrued and unpaid interest, divided by the current market value of the collateral.
- For an 86% liquidation threshold, Coinbase’s loan health table marks Danger from 77.4% to 86% LTV and sends an email in that band.
- Coinbase says it cannot prevent your collateral from being liquidated on Morpho, so monitoring the loan is up to you.
In a traditional margin account, a broker calls when your collateral gets thin and gives you a chance to add money. Crypto loans borrowed some of that vocabulary, but on an onchain loan there may be no call at all. The collateral is sold by a smart contract the moment a ratio crosses a line. That ratio is loan-to-value, and understanding it is most of what you need to borrow against bitcoin safely.
The formula
Coinbase’s help center defines LTV as the ratio of the total outstanding amount of your loan, including principal and all accrued and unpaid interest, to the current market value of your collateral. In plain numbers:
LTV = what you owe รท what your collateral is worth right now
Three things push it up: bitcoin’s price falling, interest accruing, and borrowing more. Two things bring it down: repaying part of the loan and adding collateral (or the price rising). Every one of these can happen while you sleep, which is why LTV is a live number rather than something fixed at the start of the loan.
The liquidation threshold
Each lending market on Morpho has a predetermined liquidation loan-to-value, or LLTV, and Coinbase shows it in your loan overview. It varies by collateral asset to reflect differences in volatility and liquidity. For bitcoin, Coinbase states the line at 86%: if your loan accrues enough interest or your collateral falls far enough that LTV reaches 86%, the collateral is liquidated to repay the loan, with an additional penalty of 4.38% included.
Coinbase publishes a loan health table that turns this into bands. For a market with an 86% threshold it looks like this:
| Loan health | Share of the threshold | LTV at 86% LLTV | What Coinbase recommends |
|---|---|---|---|
| Good | 0-60% | below 51.6% | Monitor LTV, no immediate action |
| Fair | 60-90% | 51.6% to 77.4% | Monitor LTV |
| Danger | 90-100% | 77.4% to 86% | Add collateral or repay; Coinbase sends an email |
| Liquidated | 100% | above 86% | Collateral sold to repay the loan and penalty |
Worked examples
Take $50,000 of bitcoin as collateral and three loan sizes. The liquidation value is simply the loan divided by 0.86; the arithmetic is ours, not Coinbase’s, and it ignores interest for now:
| Loan | Starting LTV | Collateral value at liquidation | Price drop that triggers it |
|---|---|---|---|
| $10,000 | 20% | about $11,628 | about 77% |
| $20,000 | 40% | about $23,256 | about 53% |
| $35,000 | 70% | about $40,698 | about 19% |
The pattern is the point. A loan that starts in the Good band can absorb a crash. A loan that starts at 70% already sits in Fair and is one ordinary bad week away from liquidation. Bitcoin has had many weeks like that; the FTC’s general warning about crypto is that values can change by the hour, and the change can be significant.
Interest moves the line too. If accrued interest brought the $20,000 balance to $22,000, liquidation would come at about $25,581 of collateral value, a drop of roughly 49% instead of 53%. The longer an open-ended loan runs, the less room it has.
Is there a margin call?
Not in the traditional sense. Coinbase’s warning is an email when the loan enters the Danger band; after that, liquidation is automatic. Coinbase says it cannot prevent your collateral from being liquidated on Morpho, and tells borrowers to monitor loan health regularly.
Coinbase does offer an optional loan protection setting. You choose an amount of the collateral asset to be added automatically when the loan reaches a trigger LTV. The conditions matter: you must enable it for each loan, it is applied once and must be re-enabled, it expires after one year, and if the asset is not in your balance at that moment it may be applied only partly or not at all. Coinbase’s own caution is that protection helps lower liquidation risk but is not a guarantee, and that market volatility and technical issues can still result in liquidation.
Tip: Keep the collateral asset you would use for a top-up in your Coinbase balance, not on another platform. A top-up that needs a transfer first can arrive too late.
How to keep LTV low
- Borrow well below the maximum. The maximum is the most the market will lend, not a recommendation.
- Decide in advance at what LTV you will add collateral or repay, and set an alert below Coinbase’s Danger band.
- Repay interest as it accrues on a variable-rate loan, so the balance does not creep up.
- Save the backup access link Coinbase offers for adding collateral if its main site is unavailable.
For what actually happens at the line, and why liquidations can go worse than the formula suggests, read Liquidation Risk Explained: What Happens When Your Collateral Is Sold. For the costs that make the balance grow, see Interest Rates on Crypto Loans: Variable, Fixed and the Fees on Top.