Health Factor & Liquidations

The Health Factor is the most important metric for any user who is borrowing assets on Cetra. It represents the safety of your deposited collateral against your borrowed assets.

Understanding the Score

• Formula: (Total Collateral in USD * LTV) / Total Borrows in USD

• Safe (Green): A Health Factor significantly above 1.0. The higher the number, the safer your position is against market volatility.

• At Risk / Danger (Red): As your Health Factor approaches 1.0, your position is nearing liquidation.

• Liquidation (< 1.0): If your Health Factor falls below 1.0, your position becomes officially undercollateralized.

Why Does It Drop?

Your Health Factor can drop for two primary reasons:

1. The value of your collateral decreases (e.g., the price of WETH tanks).

2. The value of your borrowed asset increases (e.g., you borrowed USDT, and the interest accumulating increases your total debt).

Loan-to-Value (LTV)

Cetra uses a standard 80% LTV (Loan-to-Value) ratio. This means for every $100 of collateral you deposit, you can borrow a maximum of $80 worth of assets. We employ strict smart contract validation to prevent you from taking actions (like a massive withdrawal) that would immediately push your Health Factor below 1.0.