What Is the Challenge of Marking-to-Market Illiquid Altcoin Collateral?

Marking-to-market (MtM) requires a reliable, observable market price to value the collateral daily. For illiquid altcoins, market prices can be sporadic, manipulated, or non-existent, making accurate valuation difficult.

This forces the use of conservative valuation models and significantly larger haircuts to account for the uncertainty and the high potential cost of forced liquidation.