Liquidations in Alchemix v3 are a system-wide safety valve, not a per-account punishment. Because loans and collateral are like-kind, with ETH backing alETH and USDC backing alUSD, market price swings do not force positions to close. The back-stop only activates if the Mix-Yield Token itself loses backing.
When liquidation does not occur​
| Event | Effect on your loan |
|---|---|
| ETH or USDC price volatility | None, debt and collateral move together. |
| alAsset drifting below peg on DEXs | None, protocol still values alAssets at face value for repayment. |
| Hitting the 90% LTV borrowing cap | Borrowing stops, the position stays open and keeps earning yield. |
What can trigger liquidation​
| Event | Detection Method |
|---|---|
| Strategy loss, exploit, or severe slippage inside MYT | Oracle shows MYT NAV is less than system debt. |
| Position exceeds liquidation threshold (95% LTV) | Oracle shows collateral value vs. debt ratio breaching threshold |
How the process works​
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Max LTV – If a position exceeds the max LTV (currently set at 95%), it is eligible for liquidations.
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Partial liquidation only – The protocol liquidates only the amount required to adjust the user’s position back to the defined target LTV, currently set at 85%.
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Multi-step liquidations – If a position can be made healthy by simply triggering a redemption early, then that is all that will happen and the liquidator will receive a small fee. Otherwise, the early redemption will occur and then the user’s collateral will be used to repay debt, along with a fee paid to the liquidator, down to the target LTV.
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Liquidator Fee Vault – Should the user’s collateral not be sufficient on its own to pay a liquidator, there is a separate fee vault that may be funded by any entity (including the DAO) that may be drawn from to pay liquidators.
Reading the health bar​
The colored bar in the vault UI gives an at-a-glance view of three numbers:
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Current LTV – your live leverage, updated in real time.
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Max LTV – the borrowing ceiling on the vault. You cannot mint alAssets beyond this green marker.
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Liq LTV – the red marker shows the liquidation threshold right now. If MYT ever records a loss, the marker slides left to reflect the reduced backing. If your current LTV remains below this marker, you will not be liquidated.
Day-to-day most users will never see a liquidation. If MYT vaults experience a loss, these mechanisms ensure losses are covered in a transparent and proportional way.
Users are encouraged to study the makeup of the MYT, as well as the risk categories. The DAO sets a maximum % of the MYT that may be allocated to high and medium risk categories. This allows users to set LTVs below liquidation thresholds based on those makeups.