Why does this matter? Because LTV is a snapshot of collateral coverage, not risk behavior. Two users can have identical LTVs but vastly different risk profiles: > User A: Borrows USDe against $HYPE, then lends it for 6% yield. Safe, predictable, low-volatility. > User B: Borrows USDe against $HYPE, buys a memecoin, which could go to zero overnight. Both have a 50% LTV. But only one is a latent liquidation risk when markets turn. Why this matters structurally: Volatility Clustering: If multiple users borrow to ape into volatile assets, you get correlated liquidation cascades. This isn’t visible via LTV alone. Credit Tranching: Just like CLOs, DeFi protocols should be segmenting risk based on usage of borrowed funds, not just collateral posted. Risk Pricing: If a protocol can’t differentiate between safe and speculative borrowers, it can’t price risk or set appropriate rates. That’s why 90% of DeFi lending still prices like junk bonds across the board. Systemic Stability: In the next leg up, the protocols that can underwrite usage-level behavior will be the ones that don’t blow up on the way down. So yes, LTV is necessary but not sufficient. We need to underwrite collateral and behavior. And right now, most of DeFi is just doing collateral.