> For the complete documentation index, see [llms.txt](https://delpho.gitbook.io/delpho-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://delpho.gitbook.io/delpho-docs/risk/liquidation-and-collateral-risk.md).

# Liquidation and collateral risk

Liquidation parameters are set per collateral. HYPE and kHYPE run at 65% initial LTV with an 80% liquidation threshold: roughly 18% of headroom on the underlying asset at the maximum mint. USDC and USDT run at 80% initial LTV with a 90% liquidation threshold: roughly 11% of headroom. See [Parameters ](/delpho-docs/parameters.md)for current values.

The nature of the risk differs by collateral. HYPE and kHYPE positions are exposed to drawdowns in the underlying asset. Stablecoin positions carry no HYPE price exposure; their LTV moves mainly if USDC or USDT deviates from $1, so liquidation risk concentrates in severe depeg scenarios.

Delpho's response combines two mechanisms:

* **Auto-deleverage (opt-in).** The progressive layer that fires before the threshold. When LTV approaches its liquidation threshold, the protocol automatically unstakes the user's sUSDV and repays USDV to bring the position back. This is the primary user protection in volatile markets.
* **Treasury-absorbed liquidation.** The discrete event at the threshold. Once the threshold is crossed, the protocol treasury, not a third-party auction, absorbs the position programmatically. The borrower pays a total liquidation penalty of about 10%: 9% to the treasury, a capped 1% to whoever calls the permissionless liquidate function. The borrower keeps the rest of the collateral. See [Liquidations ](/delpho-docs/how-delpho-works/liquidations.md)for the mechanics.

The residual risk: a fast, severe drawdown in HYPE can still move an unhedged position through its headroom faster than auto-deleverage can act. Users who do not opt into auto-deleverage carry that risk directly. For stablecoin positions, the equivalent scenario is a sharp depeg of USDC or USDT.

In the 10 October 2025 ADL crash, HYPE fell roughly 28% across the cascade. The auto-deleverage system was the layer that would have kept opted-in users insulated from the move on the collateral side. Positions without auto-deleverage enabled would have absorbed the drawdown directly. See [Stress test results](/delpho-docs/risk/stress-test-results.md).