Borrowing against tokenized stocks: four risks behind the LTV number
· StockAPY
Max LTV is a liquidation line, not a target. The weekend oracle gap, why the lend rate is a different trade, and why the cheapest borrow rate usually sits in the quietest market.
The live markets are on the Borrow page. Read this before opening a loan against any of them.
Max LTV is not a target
It is the line at which you are liquidated, not a sensible borrowing level. A position opened near the maximum is liquidated by an ordinary day's move in the share price.
The weekend is the real risk
The share stops trading on Friday; the token does not. An oracle still has to quote a price, and the gap when the market reopens can liquidate a position nobody was awake to defend. This risk does not exist when you hold the share itself.
The lend side is a different trade
Morpho's interface shows a "Lend Rate" on each of these markets, and some are high. It is not yield on your stock: in a Morpho Blue market the lender supplies the loan asset and the collateral is never lent out. To earn it you deposit USDG or USDC, not shares.
A cheap rate usually means a quiet market
Borrow rates fall when nobody is borrowing. The lowest numbers sit in markets holding a few hundred thousand dollars, where your own loan would move the rate.
Questions
- How much can you safely borrow against a tokenized stock?
- Well below the maximum LTV. Max LTV is the line at which you are liquidated, and a position opened near it is liquidated by an ordinary day's move in the share price.
- What is the weekend risk when borrowing against a tokenized stock?
- The share stops trading on Friday but the token does not. An oracle still quotes a price, and the gap when the market reopens can liquidate a position nobody was awake to defend.