Your collateral is always at risk when you use your LP tokens as security to obtain a loan or to start a leverage yield farming position; under some circumstances, it might even be liquidated.

Leveraged yield farming increases the danger of impermanent loss. A leveraged investment may be liquidated as a result of an impermanent loss. A liquidation is always an option with borrowed money or leveraged bets in the Terrace.

Lif3 provides you with an estimation of the range of the liquidation price before you take out a loan. When the relative price for the token pair moves outside of this range, a leveraged position becomes liquidatable since higher leverage indicates a smaller range. In this case, your collateral might be sold to pay off the loan and an additional incentive for selling it for cash.

Since liquidation prices are not set in stone, they could alter as the cost of your borrowing does. Prices are determined using the token pair's time-weighted average price (TWAP) from the Lif3 Price Oracle.

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