Required Declines to Trigger Liquidation

Required Decline in pTKN (vs Paired Asset) to Trigger Liquidation

The following table shows how much pTKN would need to decline (in % terms) relative to the paired asset in order to reach the liquidation threshold of 83.33% LTV, which corresponds precisely to 2.66x leverage.

The relationship between leverage and LTV is:

To determine the maximum tolerable decline before hitting 83.33% LTV, we use:

Leverage Factor	LTV	Max Tolerable Decline in pTKN (vs Paired Asset)
1.33x	16.5%	96.1%
1.66x	33.0%	84.3%
2.00x	50.0%	64.0%
2.33x	66.6%	36.3%
2.66x	83.0%	0.70% (liquidation imminent)

📌 At 2.66x leverage, you are at the liquidation threshold. Any adverse movement in pTKN vs the paired asset will trigger liquidation. At lower leverage levels, pTKN can decline significantly before triggering liquidation, providing more buffer.

Understanding these thresholds helps inform responsible leverage decisions, especially when selecting volatile or highly correlated assets.