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Education only · not financial, tax or legal adviceCanadian facts checked 2026-10-31 · a MITEY site
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Infographic

Health factor: how far a loan is from liquidation

Worked example: 2 units of collateral at $4,000 each, an 80% liquidation threshold and $4,000 borrowed give a health factor of 1.60. Liquidation starts if the price falls to $2,500, a 37.5% drop.

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Mitey says: Every number in this picture is worked out in the notes below it.
Health factor gaugeHealth factorliquidationthinsome cushionmore cushion011.523+Example HF 1.60Collateral 2 × $4,000 = $8,000 Debt $4,000 Threshold 80%HF = 8,000 × 0.80 ÷ 4,000 = 1.60Liquidation price $2,500 (−37.5%)
Health factor: how far a loan is from liquidation. Worked example: 2 units of collateral at $4,000 each, an 80% liquidation threshold and $4,000 borrowed give a health factor of 1.60. Liquidation starts if the price falls to $2,500, a 37.5% drop.

Reading the infographic

  • Health factor = collateral value × liquidation threshold ÷ debt.
  • Below 1.0, the position can be liquidated: part of the collateral is sold to repay debt, usually with a penalty.
  • In the example, collateral is $8,000, so HF = 8,000 × 0.80 ÷ 4,000 = 1.60.
  • The bands are an editorial guide to cushion, not protocol rules; each protocol sets its own thresholds.

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Education only. Nothing on this page is financial, investment, tax or legal advice, or a recommendation to buy, sell, stake, lend or borrow any crypto-asset. Crypto-assets can lose some or all of their value and are not covered by CDIC. Canadian rules change: check the dated sources above and talk to a qualified professional about your situation. Full disclaimer.