How Does the Volatility of the Collateral Asset Affect the Required Collateralization Ratio?

The higher the volatility of the collateral asset (e.g. a highly volatile altcoin), the higher the minimum collateralization ratio required by the CDP smart contract. This is a risk management measure.

A volatile asset is more likely to experience a sudden price drop, pushing the ratio below the liquidation threshold. By requiring a higher initial ratio (e.g.

200% instead of 150%), the protocol builds a larger buffer to absorb price swings, protecting the system from under-collateralization and potential insolvency.