Given the volatile nature of cryptocurrencies, a safe Vault can become at risk very quickly depending on the Dai balance and amount of Collateral locked within. Ensuring that the collateralized assets remain safe from liquidation is entirely in the hands of each Vault owner.
Some common practices to avoid liquidation can be found below:
Monitor your Vault
- Keep note of the Vault ID numbers that you are responsible for. This will enable you to identify your Vault without needing access to the wallet that owns it.
- Bookmark your Vault ID, your wallet does not have to be connected to view your Vault.
- Maintain adequate access to the Vaults, especially during volatile periods in the markets.
- Set up price alerts for the collateral asset(s) being used, so that you know when the Liquidation Price is being approached.
Know your prices and ratios
- Get familiar with your liquidation price. For example, if your liquidation price is 1200 ETH/USD, this price should be top of mind. Keep in mind that this price changes with the accrued Stability Fees.
- Set a target collateralization ratio. Some users find it useful to always have a target collateralization ratio. Meaning, they can always see if their Vault has fallen below the ratio they deem to be “safe”.
- Know and set your target prices. Some users find it useful to know the prices at which their collateralization ratio will hit certain targets. For example, if the current price of ETH/USD is 1000 your Vault has a corresponding collateralization ratio of 250%, and you are concerned about anything under 200%, your collateralization ratio will hit this threshold at a ETH/USD price of 799.9.