Liquidation Price Calculator
Knowing your liquidation price is essential when borrowing against crypto collateral in DeFi protocols. When the market price of your collateral falls to or below the liquidation price, your position becomes eligible for liquidation: an external actor repays your debt and receives your collateral at a discount. The liquidation price depends on three factors: your outstanding debt in USD, the protocol's minimum liquidation threshold (expressed as a ratio, e.g. 1.5 for 150%), and the number of collateral token units you have deposited. The formula is Liquidation Price = Debt * Liquidation Threshold Ratio / Collateral Units.
Liquidation price formula
Liquidation Price = Debt * (Threshold% / 100) / Collateral Units
Drop to Liquidation = (Current Price - Liquidation Price) / Current Price * 100
Example: $1,000 debt, 150% liquidation threshold, 1 ETH collateral. Liquidation price = $1,000 * 1.5 / 1 = $1,500. If ETH is at $3,000, you have 50% buffer before liquidation.
Risk management strategies
- Maintain a CR at least double the liquidation threshold for volatile assets. For a 150% threshold, target 300% CR.
- Set automated alerts (via DeFi dashboards or protocol notifications) when your position reaches 120% of the liquidation price.
- Keep dry powder (unused stable assets) available to add collateral quickly during market drops.
- Repaying part of your debt raises your CR faster than adding collateral of equivalent value, because it directly reduces the numerator of the liquidation equation.
Liquidation price: frequently asked questions
What is a liquidation price in DeFi?
The liquidation price is the collateral asset price at which your collateralization ratio falls to the protocol's minimum liquidation threshold. Below this price, a liquidator can repay your debt and claim your collateral at a discount.
How is the liquidation price calculated?
Liquidation Price = (Debt * Liquidation Threshold Ratio) / Collateral Units. For example, $1,000 debt with a 150% threshold on 1 ETH gives a liquidation price of $1,500 per ETH.
What is the liquidation penalty?
Most protocols charge a liquidation penalty (typically 5-15%) that is added to the collateral seized by the liquidator. This incentivizes liquidators to act quickly when a position becomes undercollateralized. The penalty comes out of your collateral.
How can I avoid liquidation?
Monitor your position regularly. Add more collateral if the asset price falls, or repay part of your debt to raise your CR. Set price alerts at 20-30% above your liquidation price to give yourself time to react.
Does this calculator apply to leveraged trading protocols?
Yes, in principle. Protocols like dYdX and GMX also use a liquidation price concept, though they may calculate it differently. The formula here (Debt * Threshold / Units) applies to over-collateralized lending protocols such as MakerDAO and Aave.
Official sources
- MakerDAO: MakerDAO Documentation.
- Aave: Aave Protocol FAQ.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.