What Can Cause Liquidation

Liquidation can happen under multiple scenarios so it's important to understand the mechanism behind TezFin liquidations.

As explained, if you exceed your borrowing limit, you can get liquidated. However, this doesn't simply mean that if you overextend your initial borrowing. It can happen through multiple scenarios, some of which can be sudden.

1. Decrease in Collateral Value: You can get liquidated if your borrowed currency value stays relatively the same but your collateral currency value decreases, thereby reducing your borrowing limit and potentially causing you suddenly to exceed your limit.

2. Increase in Borrowed Currency Value: You can get liquidated if your collateral currency value stays relatively the same (or even grows) but your borrowed currency value increases to exceed your borrowing limit.

3. Growth of Debt Due to Interest: You can get liquidated if your collateral currency value stays relatively the same (or even grows) sbut your debt grows (through interest owed) to exceed your borrowing limit.