Liquidation

Liquidation is the safety valve on a crypto-backed loan — pointed at you. When your collateral drops in price, your loan-to-value rises; cross the lender’s threshold and it sells your crypto, at whatever the market price is right then, to claw back what you owe. You don’t choose the moment, and you may not choose what gets sold.

Why it matters: this is the hidden cost of “spend your crypto without selling it.” A card that borrows against your holdings can, in a sharp downturn, sell those holdings at the worst possible time — locking in a loss and triggering a taxable disposal you never planned. A routine purchase made months ago can indirectly force that sale. Most platforms send a margin-call warning first, but in a fast drop there’s little time to add collateral or repay.

For example: Nexo’s Credit Mode can begin liquidating your collateral near 83.3% LTV if prices fall, after margin-call notifications. ether.fi Cash’s Borrow Mode liquidates positions that breach their per-asset thresholds, charging a 1–5% liquidation bonus on top. Spend straight from your own balance instead — Nexo’s Debit Mode, or ether.fi’s Direct Pay — and there’s nothing to liquidate. Both as of June 2026.