Looping Strategy
A leveraged DeFi strategy involving repeated deposit and borrow cycles to amplify yield exposure.
A looping strategy is a leveraged DeFi technique in which a user deposits collateral, borrows against it, re-deposits the borrowed amount, and repeats the cycle — each iteration increasing their effective exposure to the underlying yield source.
In onchain reinsurance, a looping strategy might work as follows: 1. Deposit USDC into Ensuro → receive eTokens earning insurance premium yield 2. Use eTokens as collateral in a lending protocol → borrow USDC 3. Deposit the borrowed USDC back into Ensuro → earn more eTokens 4. Repeat until loan-to-value limits prevent further borrowing
The amplified yield comes at the cost of amplified loss exposure. In a major insurance claims event that reduces eToken value, the collateral falls, the lending protocol may issue a liquidation, and the looper loses more capital than a non-leveraged depositor.
Looping is a sophisticated strategy appropriate only for capital that can absorb correlated losses across all loop layers simultaneously.
Example usage
“DeFi-native capital providers use looping strategies in Ensuro to target 20%+ APY by leveraging eToken positions, while accepting amplified downside in loss events.”
Frequently asked questions
What is Looping Strategy?
A leveraged DeFi strategy involving repeated deposit and borrow cycles to amplify yield exposure. A looping strategy is a leveraged DeFi technique in which a user deposits collateral, borrows against it, re-deposits the borrowed amount, and repeats the cycle — each iteration increasing their effective exposure to the underlying yield source.
How is Looping Strategy used in practice?
DeFi-native capital providers use looping strategies in Ensuro to target 20%+ APY by leveraging eToken positions, while accepting amplified downside in loss events.
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