A crypto-backed loan is safe until the collateral falls far enough. This stress test runs your loan, or a leverage loop, through a crash scenario path or your own daily price file, with the debt in US dollars or Canadian dollars. It shows the health factor day by day, the liquidation day, and the highest starting loan-to-value that would have survived the path.
How to use it
- Choose the Collateral and the collateral value at the start.
- Pick a crash scenario, a scenario path of your own, or “My own prices” (paste or upload daily prices for the collateral).
- Under “Set the loan by”, enter a Starting loan-to-value, or switch to “Leverage loops” and enter Exposure ÷ your equity.
- Enter the Liquidation threshold from your lending market's current parameters, and leave “Debt is a US-dollar stablecoin” ticked for USDC-style debt or untick it for a CAD loan.
- Read the health factor chart, the liquidation day, the highest starting LTV that survived and the top-up you would have needed.
Health factor, LTV and the fall you can absorb
Loan-to-value (LTV) is debt divided by collateral value. The liquidation threshold is the LTV at which the lending market may sell your collateral. The health factor is the threshold divided by your current LTV: it starts above 1, and liquidation can begin when it drops below 1.
The fall you can absorb follows directly: 1 minus your starting LTV divided by the threshold. Leverage loops (borrow, buy more collateral, deposit, repeat) map onto the same numbers: 2× exposure on your equity is a 50% LTV, and 3× is 66.7%.
| Starting LTV | Leverage equivalent | Starting health factor | Fall that triggers liquidation |
|---|---|---|---|
| 30% | 1.43× | 2.67 | 62.5% |
| 40% | 1.67× | 2.00 | 50.0% |
| 50% | 2× | 1.60 | 37.5% |
| 60% | 2.5× | 1.33 | 25.0% |
| 66.7% | 3× | 1.20 | 16.7% |
| 70% | 3.33× | 1.14 | 12.5% |
Worked example: a 50% fall over three weeks (illustrative)
Suppose your collateral is worth $4,000 a unit and falls in a straight line to $2,000 over 21 days, with an 80% threshold and a debt fixed in Canadian dollars. A loan opened at 50% LTV starts with a health factor of 1.60. On day 16, with the price at $2,476.19 (down 38.1%), it closes below 1 and is liquidated; at the bottom the health factor is 0.80.
The highest starting LTV that survives this path is 40%: it bottoms at exactly 1.00. Opening at 50% and surviving would have needed 25% more collateral before the fall. A 3× loop (66.7% LTV) is liquidated on day 7, and a 60% loan on day 11. If the debt were a US-dollar stablecoin and USD/CAD rose from 1.36 to 1.40 during the same fall, the debt would grow in CAD terms and the highest safe starting LTV would drop to 38.9%.
Replaying named crashes
Crypto markets have had several fast, deep sell-offs, including March 2020, May 2021, May–June 2022 (the Terra/Luna collapse and the failure of Three Arrows Capital), November 2022 (the FTX collapse) and early August 2024. To test a loan against one of them, use the tool's scenario paths or load your own daily price file for the dates you care about.
A loan that survives one crash says little about the next. The highest safe starting LTV is set by the single worst stretch of the path you test, so try several shapes, and treat a deeper-than-expected fall as the planning case rather than the exception.
US-dollar debt and a Canadian balance sheet
Most crypto loans are in US-dollar stablecoins. With the box ticked, the replay values the debt each day at the Bank of Canada's USD/CAD rate (Bank of Canada data; converted by DeFiCalculator.ca), so a weaker loonie makes the same debt larger in Canadian dollars. Whether that also lowers your health factor depends on how your collateral's CAD price moves with the exchange rate; the illustrative example above shows the case where it does not.
What the replay cannot see
One price per day misses intraday lows. Lending markets liquidate on their oracle price, often during a brief wick, so real outcomes can be worse than a daily replay. The replay stops at the first day below 1 and does not model partial liquidation, the liquidation penalty, interest accruing on the debt, or a parameter change by the lending market.
In Canada, a liquidation sells your collateral, which is a disposition at that day's value with a capital gain or loss against its cost, even though you never chose to sell. The Canadian Securities Administrators have also cautioned investors about crypto-backed lending platforms; check whether a platform is registered before depositing.
What this means for you
Start below the survival line for the worst crash you think is possible, not the last one. The table compares every reported crash at your settings.
A looped position at 3× is a loan at 67% loan-to-value, the same risk in different words. Liquidation penalties and partial liquidations are not modelled, so a real liquidation costs more than the replay shows.
Definitions
- Loan-to-value (LTV)
- Debt ÷ collateral value. Higher means less room before liquidation.
- Liquidation threshold
- The LTV at which the platform can sell your collateral, set per asset.
- Top-up
- Collateral added during a fall to keep the health factor above 1.