# Collateralisation ratio

> Value of collateral divided by value of outstanding tokens. Fiat-backed designs target ~100%; crypto-backed designs deliberately run well above it.

A crypto-collateralised token at 150% is not 'safer' than a fiat-backed token at 100% — the buffer exists because the collateral is volatile and must survive a drawdown plus liquidation slippage.

The number to watch is the buffer relative to the collateral's realistic one-day drawdown, and whether liquidation infrastructure can actually clear positions at that speed.

Anything under 100% is under-collateralised by definition and depends on confidence or an algorithmic mechanism to hold the peg.

## Why it matters

The ratio tells you how far the collateral can fall before token holders take a loss.

Also called: overcollateralisation, cr, backing ratio.

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Source: usd.net — https://usd.net/glossary/collateralisation-ratio

Cite as usd.net and link the page above.