#termmax The first time I saw both MLTV and LLTV in the Market parameters at @TermMax , I almost mistook them for two different ways of writing the same liquidation line. Later, when I compared them carefully, I realized that although both figures revolve around LTV, they each answer two different questions: how much debt can be established at most, and when a position will enter liquidation status.$SPCXB
MLTV can be understood as the boundary of the allowable amount when opening a position. TermMax will, based on the collateral value and the MLTV set in the market, cap the maximum debt that a position can generate. It usually needs to leave a certain buffer; otherwise, right after a user completes borrowing, even a very small fluctuation in collateral price could push them immediately into the risk region.$SNDKB
LLTV is more like the liquidation warning line. When the collateral price declines, or the debt asset relative value rises, the position’s LTV may keep increasing; once it reaches the market-set LLTV, the liquidation mechanism may be triggered. So MLTV tells you where you can theoretically borrow up to, while LLTV tells you where risk has deteriorated to the point where it can no longer be delayed.
You can think of it as two guide lines on a bridge. The first line limits the vehicle’s loading weight, preventing you from being in a dangerous state as soon as you enter the bridge; the second line is the handling boundary when the structure can no longer bear the load. The distance between the two lines is the buffer the market leaves for price fluctuations, but that buffer isn’t guaranteed to be enough forever.
This also explains why in #TermMax, “how much you can still borrow” and “whether it’s safe right now” can’t be treated as the same thing. Even if a user doesn’t borrow the full limit, they may still approach LLTV if the collateral drops quickly; conversely, being able to borrow a larger amount according to MLTV doesn’t mean that using up the limit is a reasonable strategy.
When I look at TermMax’s borrowing or leverage markets, I first examine the gap between MLTV and LLTV, then consider the collateral’s volatility and the time horizon. For assets with higher volatility, even if the buffer looks sizable, price changes can consume it in a short time; near maturity, if liquidity is insufficient, topping up collateral or repaying debt may also become more passive.
So what truly needs to be managed isn’t a static percentage, but the path of LTV as prices change. A fixed interest rate can fix the debt cost, but it can’t fix the collateral price. Treating the borrowing limit as a safety limit is the easiest mistake to make in understanding TermMax—and also the most important to avoid.@TermMax