Liquidation

Liquidation is the forced sale of pledged crypto collateral to repay a defaulted loan. It happens when collateral value drops below the lender's threshold and the borrower doesn't top up or pay down the loan — or when a fixed-term loan reaches maturity unpaid. The sold crypto generates a taxable event for the borrower at sale price minus cost basis.

In DeFi protocols, liquidation often happens automatically by smart contract — instantly, at the on-chain oracle's price, with no recourse. In CeFi lending (centralized regulated lenders), liquidation is typically a multi-step process with borrower notification, cure period, and partial sale options.

Why it matters for Milo customers

Milo's liquidation policy is borrower-friendly: thresholds are fixed at funding, not adjustable mid-loan. Collateral is sold only if the loan-to-value ratio reaches the disclosed liquidation threshold, and because that threshold is price driven, borrowers are encouraged to cure a margin call immediately. To date, Milo has maintained a track record of zero forced liquidations across its mortgage portfolio.

Related terms

Margin CallCollateral Top-UpLoan-to-Value (LTV) on CryptoRehypothecation
LienLiquidity

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