You can now add collateral to your loan when you borrow on Sovryn!
The intended release date for this feature was to be next week, but in light of recent and ongoing market conditions, we thought it pragmatic to expedite it in the current development cycle and ship it early.
At times of uncertainty like these in the markets, one of your top priorities should be to preserve capital. In the past 24 hours, the price of bitcoin has dropped well below the strong psychological support level of $30,000.
The funds you deposit to the protocol when taking out a loan is called collateral. The value of collateral against the value of the loan is called a collateral ratio. Currently, an initial collateral ratio of 150% is required when borrowing on the protocol. When the value of the deposited collateral falls below 115%, a gradual liquidation of the collateral is initiated, meaning you must maintain a minimum of 1.15x the loan amount in collateral.
Liquidation is the point at which the collateral you put down is sold to cover the risk of defaulting on the loan. This gradual liquidation of collateral can result in the complete depletion of the borrower’s deposited funds, which is never a pleasant experience.
On the Sovryn protocol, you now have the ability to deposit more collateral to your loan. By doing this, you will increase the collateral ratio to a healthier level and reduce the risk of liquidation.
You will notice a new ‘Add Collateral’ button related to open loans in the Active tab of the 'My Debts' section, on the Borrow page.
In the ‘Add Collateral’ popup, you will be able to see your current collateral balance, your collateral ratio displayed as a percentage, and the liquidation price.
You can enter the amount of collateral you would like to add to the loan, which will give you a new collateral balance, collateral ratio and liquidation price. You will also have the option of selecting from predetermined percentage amounts based on the balance of your wallet.
Once you have specified the amount of collateral you would like to add, you will be prompted to review and approve the transaction with your wallet. And, hey presto, you will have managed your risk in these rough seas.