<figure class="wp-block-image size-large"><img width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations.webp" alt="Avoiding Liquidations" class="wp-image-3284"/></figure>



What if I get LIQUIDATED?



This is a common question we get.



And although the fear is unwarranted, it’s understandable.



Liquidation has a severe connotation in finance, and an even bigger one in the <a rel="noreferrer noopener" href="https://www.thecoinzone.com/pulsechain/pulsechain-official-guide" target="_blank">PulseChain</a> community. 



But once you understand how liquidations work in <a href="https://www.thecoinzone.com/defi/what-is-liquid-loans" target="_blank" rel="noreferrer noopener">Liquid Loans</a>, and this simple strategy to avoid them, you won’t fear anymore. 



<h2 class="wp-block-heading tablecontent">How Do Liquidations Work?</h2>



To ensure that the entire <a rel="noreferrer noopener" href="https://www.thecoinzone.com/cbdc/decentralized-stable-assets-cbdcs-and-the-future-challenges-of-stable-assets" target="_blank">stable asset</a> supply remains overcollateralized by PLS value, Vaults that fall under the minimum <a href="https://www.thecoinzone.com/tradfi/what-is-collateral-ratio" target="_blank" rel="noreferrer noopener">collateral ratio</a> of 110% are subject to being closed (liquidated).



The debt of the Vault is canceled and absorbed by the <a href="https://www.thecoinzone.com/liquidloans/stability-pool" target="_blank" rel="noreferrer noopener">Stability Pool</a>, and its collateral is distributed among the Stability Providers.



The owner of the Vault still keeps the full amount of <a href="https://www.thecoinzone.com/liquidloans/usdl-crypto" target="_blank" rel="noreferrer noopener">USDL</a> borrowed but loses ~10% value overall, hence it is critical to always keep the ratio above 110% – ideally above 150%.



The reason why the fear exists is because typically users total value goes to $0.00 when margin or leverage trading on exchanges. 



But in Liquid Loans, users only lose a maximum of 10% of their total value. 



For example, if a user is liquidated with $10,999 worth of PLS, they lose the PLS but keep 10,000 USDL. This is far from a liquidation to zero. 



But regardless, nobody wants to lose 10% instantly, so do this to avoid liquidation.



<h2 class="wp-block-heading tablecontent">How To Avoid Liquidations</h2>



<ol>
<li>Choose a High Collateral Level. If you choose a collateral ratio of 110%, you are betting that the price of $PLS will go up from that point and never go below it ever again. Rather, it is safer to choose a collateral level of AT LEAST 150% to give you enough time to repay your debt in a downturn.</li>



<li>Keep Your USDL in the Stability Pool. If you don’t do anything with your USDL (like gamble it away) you will always have enough value to repay your debt and avoid liquidation. The Stability Pool is a great place to park it in the meantime.</li>



<li>Pay Attention to Your Collateral Level. If you simply pay attention, you can see when you are approaching 110%. Even in crypto a 50% drop in a day is extremely rare. If your collateral level is above 150%, then you will have plenty of time to repay your debt.</li>



<li>Have Other Liquid Funds. If you have other funds such as<a href="https://www.thecoinzone.com/pulsechain/pulsex-complete-guide" target="_blank" rel="noreferrer noopener"> PLSX</a>,<a href="https://www.thecoinzone.com/pulsechain/loan-token-ultimate-guide" target="_blank" rel="noreferrer noopener"> LOAN</a>, or another stable, you can swap those for USDL and repay your debt. But, if you did something else with your USDL, and have no other funds to buy more and repay your debt, you are at the mercy of the markets. </li>
</ol>



<h2 class="wp-block-heading tablecontent">The Bottom Line</h2>



Liquidations are a scary term, but investing emotionally is a time-tested strategy to getting rekt.



If you understand liquidations and how to avoid them, the fear dissipates. 



P.S. Just keep your USDL in the Stability Pool and monitor your vault. That way you’ll always have access to it if you need to repay your debt and you’ll earn yield while waiting.

Stablecoins Under Siege: The SEC’s New Rules Aren’t What They Seem

How to Earn Yield While HODL'ing PLS

Bitcoin’s Rise: My View From the Trenches

Here's What Happens to LL Users When Prices Rise (Actual Numbers)

<figure class="wp-block-image size-large"><img width="325px" height="183px" srcset="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/07/04212110/Avoiding-Liquidations.webp" alt="Avoiding Liquidations" class="wp-image-3284"/></figure>



What if I get LIQUIDATED?



This is a common question we get.



And although the fear is unwarranted, it’s understandable.



Liquidation has a severe connotation in finance, and an even bigger one in the <a rel="noreferrer noopener" href="https://www.thecoinzone.com/pulsechain/pulsechain-official-guide" target="_blank">PulseChain</a> community.&nbsp;



But once you understand how liquidations work in <a href="https://www.thecoinzone.com/defi/what-is-liquid-loans" target="_blank" rel="noreferrer noopener">Liquid Loans</a>, and this simple strategy to avoid them, you won’t fear anymore.&nbsp;



<h2 class="wp-block-heading tablecontent">How Do Liquidations Work?</h2>



To ensure that the entire <a rel="noreferrer noopener" href="https://www.thecoinzone.com/cbdc/decentralized-stable-assets-cbdcs-and-the-future-challenges-of-stable-assets" target="_blank">stable asset</a> supply remains overcollateralized by PLS value, Vaults that fall under the minimum <a href="https://www.thecoinzone.com/tradfi/what-is-collateral-ratio" target="_blank" rel="noreferrer noopener">collateral ratio</a> of 110% are subject to being closed (liquidated).



The debt of the Vault is canceled and absorbed by the <a href="https://www.thecoinzone.com/liquidloans/stability-pool" target="_blank" rel="noreferrer noopener">Stability Pool</a>, and its collateral is distributed among the Stability Providers.



The owner of the Vault still keeps the full amount of <a href="https://www.thecoinzone.com/liquidloans/usdl-crypto" target="_blank" rel="noreferrer noopener">USDL</a> borrowed but loses ~10% value overall, hence it is critical to always keep the ratio above 110% – ideally above 150%.



The reason why the fear exists is because typically users total value goes to $0.00 when margin or leverage trading on exchanges.&nbsp;



But in Liquid Loans, users only lose a maximum of 10% of their total value.&nbsp;



For example, if a user is liquidated with $10,999 worth of PLS, they lose the PLS but keep 10,000 USDL. This is far from a liquidation to zero.&nbsp;



But regardless, nobody wants to lose 10% instantly, so do this to avoid liquidation.



<h2 class="wp-block-heading tablecontent">How To Avoid Liquidations</h2>



<ol>
<li>Choose a High Collateral Level. If you choose a collateral ratio of 110%, you are betting that the price of $PLS will go up from that point and never go below it ever again. Rather, it is safer to choose a collateral level of AT LEAST 150% to give you enough time to repay your debt in a downturn.</li>



<li>Keep Your USDL in the Stability Pool. If you don’t do anything with your USDL (like gamble it away) you will always have enough value to repay your debt and avoid liquidation. The Stability Pool is a great place to park it in the meantime.</li>



<li>Pay Attention to Your Collateral Level. If you simply pay attention, you can see when you are approaching 110%. Even in crypto a 50% drop in a day is extremely rare. If your collateral level is above 150%, then you will have plenty of time to repay your debt.</li>



<li>Have Other Liquid Funds. If you have other funds such as<a href="https://www.thecoinzone.com/pulsechain/pulsex-complete-guide" target="_blank" rel="noreferrer noopener"> PLSX</a>,<a href="https://www.thecoinzone.com/pulsechain/loan-token-ultimate-guide" target="_blank" rel="noreferrer noopener"> LOAN</a>, or another stable, you can swap those for USDL and repay your debt. But, if you did something else with your USDL, and have no other funds to buy more and repay your debt, you are at the mercy of the markets.&nbsp;</li>
</ol>



<h2 class="wp-block-heading tablecontent">The Bottom Line</h2>



Liquidations are a scary term, but investing emotionally is a time-tested strategy to getting rekt.



If you understand liquidations and how to avoid them, the fear dissipates.&nbsp;



P.S. Just keep your USDL in the Stability Pool and monitor your vault. That way you’ll always have access to it if you need to repay your debt and you’ll earn yield while waiting.

How To Not Get Liquidated (Common Sense Approach)

Liquidations inside the Liquid Loans protocol can easily be avoided if you take these steps.