Borrowing Power

Borrowing power is the maximum amount of assets a user can borrow based on the value of their deposited collateral and the protocol's risk parameters. It is calculated by multiplying the collateral value by the loan-to-value ratio.

As the market value of the collateral changes, the user's borrowing power also changes. If the value of the collateral drops, the borrowing power decreases, potentially bringing the position closer to the liquidation threshold.

Users must carefully manage their borrowing power to ensure they have enough buffer to withstand market volatility without being liquidated. It is a dynamic metric that requires constant monitoring in active trading strategies.