Plain-English definition
Collateral is the asset you post so a system will trust you: deposit it to borrow against it, or to back a stablecoin you mint. If you default, the collateral is sold to make the system whole.
Because crypto collateral is volatile, systems demand more than the loan is worth, an over-collateralised buffer. When the collateral falls fast enough to threaten that buffer, the system liquidates.
Why it matters
Collateral matters because crypto markets can look precise while still being shallow, crowded, or poorly sourced. A useful read is not just the number. It is the number, the size behind it, the context around it, and the part it cannot explain.
Simple example
A simple Collateral example is a reader comparing two venues with the same headline price but different depth. The deeper venue can absorb more capital before the trade, peg, or yield reading starts to move against the user.
How Bathymark uses this term
Bathymark uses Collateral to translate open market data into live liquidity readings. When the term touches a live page, the reading links back to the relevant chain, protocol, stablecoin, DEX, perps, or Signal so the source remains checkable.
Common mistake
The common mistake is treating Collateral as a complete signal by itself. Bathymark treats it as one instrument: useful when read beside liquidity, source, size, and what the number cannot prove.