Liquidation Risk
Core Risk
Borrowing on Fira, whether in fixed-maturity or floating-rate markets, requires collateral and carries material liquidation risk. Liquidations can proceed rapidly, automatically, and without notice, potentially resulting in substantial or complete loss of collateral holdings.
How Liquidations Occur
Positions become vulnerable when a borrower's Loan-to-Value (LTV) ratio exceeds the Liquidation LTV (LLTV) threshold. This triggers eligibility for liquidators to seize collateral in exchange for debt repayment.
Triggers
Collateral value declines
Borrowed asset appreciation
Volatility shifts
Pricing disruptions
Real-World Scenarios
Liquidation materializes quickly in these circumstances:
Sharp market movements
Liquidity constraints
Network congestion
Oracle failures
Cascading liquidations during broader market stress
Mitigation Strategies (With Caveats)
Users may employ defensive tactics:
Conservative initial leverage
Active position monitoring
Partial debt repayment
Independent risk assessment
These are not guarantees. Interface warnings and any automated features provide indicative guidance only and may fail during stressed conditions.
Fixed-Rate Maturity Risk
In fixed-rate markets, borrowers face an additional liquidation vector: forced liquidation at maturity. When collateral (BTs) reaches expiry, the DAO can force-liquidate all remaining positions — even healthy ones — to enable collateral redemption.
A 24-hour grace period after maturity allows borrowers to repay before forced liquidation is triggered. Borrowers who do not close their positions before or during this window risk forced liquidation regardless of their health factor.
Current Market Parameters
Fixed-rate
PT-USDe
90%
89%
3.1%
Fixed-rate
PT-sUSDe
90%
89%
3.1%
Fixed-rate
PT-USDG
94.75%
94%
1%
Floating-rate
wstETH
89%
87%
3.4%
Floating-rate
cbBTC
90%
88%
3.1%
Key Takeaway
Liquidation represents an inherent feature of collateralized borrowing. Users should not assume timely intervention opportunities exist during extreme volatility.
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