A Crypto Card Lets You Spend Without Selling Your ETH. A Liquidation Sells Half of It at Once.

There is a card that pays the coffee shop in dollars without touching your ETH. It borrows the dollars instead, against everything sitting in your vault. The coffee is settled and the ETH is still yours. You also have a margin loan you opened at a counter.

That is ether.fi Cash, and the pool of vault tokens behind it on Optimism was worth $193.2 million on August 20, by DefiLlama's count. A day earlier it read $134.9 million. Ether gained 21% over the same stretch.

Two modes, and only one of them is a loan

The card runs in Direct Pay Mode or Borrow Mode. Direct Pay spends what you hold: it pulls USDC or LiquidUSD out of the vault, converts it, and the balance goes down. Borrow Mode leaves the assets where they are. In ether.fi's own words, "your crypto remains in your Vault" and the card draws a USDC loan against the whole portfolio.

The loan behaves nothing like a credit card statement. The help center says "interest starts immediately after you borrow," with "no grace period or billing cycle." Reviews of the product put the standing rate near 4% a year, floating with the money market underneath it, and ether.fi has run promotional stretches at zero. There is no repayment date. The balance compounds every second until you clear it.

The number that decides everything

Each asset in the vault carries a loan-to-value figure that sets how much of its value counts toward your borrowing limit. ether.fi publishes the table, and the spread across it is wide.

• 90% — USDC, USDT, EURC, frxUSD. Dollars lend against dollars.
• 55% — wETH and weETH, the assets most ether.fi users actually hold.
• 52% — eBTC. 45% — wHYPE. 40% — beHYPE.
• 20% — OP, plus ETHFI and sETHFI. The platform's own governance token counts for twenty cents on the dollar.

The Liquid vault tokens sit in between: LiquidETH and LiquidBTC at 50%, LiquidRWA and LiquidEUR at 70%, LiquidUSD and LiquidReserve at 80%. Those six tokens are what DefiLlama counts when it publishes a number for the card business, alongside eBTC and eUSD.

A second figure sits above the first. USDC has a 90% loan-to-value and a 95% liquidation threshold, so there are five points of room between the moment you stop being able to borrow and the moment somebody can take your collateral. Every asset has its own pair.

What a liquidation does here

The help center is direct about the trigger: if your borrowing runs past the allowed amount, "the system may liquidate some of your assets to maintain the health of your account." The word "some" is doing a lot of work.

The mechanic ether.fi documents is that 50% of your total collateral is liquidated first, and if the position is still unhealthy after that, the rest goes too. Half the vault goes in one step, whatever the size of the overshoot. Whoever executes it collects a bonus on top — 1% on USDC, 3.5% on weETH.

The collateral pool moves with the price

Between July 21 and August 19, DefiLlama's figure for the Optimism vaults climbed from $116.97 million to $134.92 million. Ether closed at $1,901.77 on the first date and $1,914.81 on the second. Flat price, 15% more value: that growth is people depositing.

August 20 is a different kind of move. The reading jumped $58.3 million in a single day, on the day ether ran from $1,914.81 to $2,314.17. Part of that is new deposits and part of it is the same coins marked higher, and the two are indistinguishable from the outside. The borrowing limits attached to every account went up either way.

The tax argument is the weakest reason to do this

Borrow Mode gets sold hard on one point: spending borrowed dollars is not a disposal, so no capital gain is realised and no tax event lands. That part is accurate. It is also the least interesting thing about the product.

A liquidation is a sale. It happens at a price you did not choose, on a size set by the protocol, on the day the market is worst, with a 3.5% cut going to the account that executes it. The taxable disposal you deferred arrives anyway, in its ugliest form. Anyone reaching for Borrow Mode to sidestep a tax bill has picked up leverage as a side effect and should size it as leverage, not as a payment convenience.

Five things to check before you switch it on

• Know both of your numbers. The loan-to-value tells you the ceiling; the liquidation threshold tells you where somebody else can act. ether.fi lists both per asset, and they differ by only a few points on stable collateral.
• Price your own liquidation before you spend. Divide your debt by the threshold to get the collateral value that ends the position, then divide by your token count. That is a price. Put it somewhere you will see it.
• Keep the 20% assets out of the load-bearing role. A vault full of ETHFI or OP gives you a fifth of its value in credit and a token that falls faster than ether when the market turns.
• Remember the debt only moves one way. Card spending adds to it. Nothing reduces it except a repayment you make or a liquidation somebody else makes. Groceries cannot be returned to the protocol.
• Watch the interest yourself. No billing cycle means no monthly reminder. A balance you forgot about in March is quietly larger in August.

Where that leaves a cardholder

Non-custodial cards solve a genuine problem. Selling ETH to pay for a flight is annoying, and a product that removes the sale is worth having. The part that gets lost between the app screenshots and the cashback tiers is that the mechanism is a collateralised loan on a volatile asset, and the counterparty is a smart contract with no interest in your circumstances.

$193.2 million is the friendly version of this arithmetic — the print you get after a 21% day. Ether was $1,566 eight weeks earlier, and the same vault would have shown a much smaller number with the same coins in it. Borrow against today's figure as though June is coming back. On a coin with that range, a 55% loan-to-value is the distance you start with, and the market closes it for you.