Margin calls and liquidations are events that can occur if your Loan-to-Value (LTV) ratio reaches critical thresholdsprotecting the lender by ensuring sufficient collateral to cover the loan in case of default. You can lower your LTV (and thus the bitcoin prices that trigger margin calls and liquidations) by adding collateral or repaying part of your loan.

Margin call:

A margin call occurs if your LTV ratio ever reaches 70%, even temporarily. A margin call is a requirement to lower your LTV to 60% or below within 24 hours, otherwise part of your collateral will be liquidated to lower your LTV to 60% for you. If a margin call occurs, you will be notified via email and push notification (if notifications are enabled).

To resolve your margin call, you must add collateral or repay part of your loan within your Strike app’s Loan Center. To do this, ensure you have sufficient funds in your Strike account, then visit your Cash tab and follow these steps:

1. Tap your LTV Tracker to open your Loan Center
2. Tap “Resolve margin call”
3. Select “Pay cash” or “Add bitcoin”
4. Follow the steps to add sufficient funds to lower your LTV to 60% or below

During the 24-hour period, if the value of your collateral rises sufficiently to bring your LTV back to 60% on its own, then your margin call will be canceled.

Liquidation:

If your LTV reaches the critical threshold of 85% at any time, then an automatic partial collateral liquidation will be immediately triggered to reduce your LTV to 60%. Unlike a margin call, there is no 24-hour window to resolve this situation, which is why it’s important to monitor your LTV and consider proactively adding collateral to protect against liquidation risk.

Liquidations due to failed payments:

Collateral liquidations can also occur if you fail to make your required loan payments:

• Monthly interest payments: If you have a Monthly Payment loan and fail to make a scheduled payment, you will have a 10-day grace period to make the payment, otherwise sufficient collateral will be liquidated to cover the overdue amount, plus a liquidation fee.
• Payment at maturity: If you fail to pay your loan’s required amount at the maturity date, you will have a 10-day grace period to make the payment, otherwise sufficient collateral will be liquidated to cover your loan’s total outstanding amount plus a liquidation fee. Upon liquidation, your loan will be closed and any remaining collateral will be returned to your Strike account within 1 business day.

Please note that any liquidation of your bitcoin collateral, including using your collateral as a payment source for monthly interest or payment at maturity, is treated as a bitcoin sale on your behalf, incurring a taxable event.