šRecently, STONfi was integrated into EVAA, which now makes it possible to build looping strategies with the TON/USDT pool.
[Read more in my previous post]
The idea of our looping strategy is to put LP tokens from the TON/USDT pool as collateral on EVAA, then borrow new TON and USDT tokens, add them back into the pool, and repeatš ā increasing your APR with every cycle.
The maximum you can borrow is 79% LTV ā but never do thisš§! At that level, youāre way too close to liquidation (7% Health Factor / 86% LTV).
And donāt forget: youāre not borrowing LP tokens, youāre borrowing the tokens themselves. Because of this, your Health Factor will gradually fall.
Why will it fallš¤š?
Collateral decreasesš
When TON rises or falls, impermanent loss in the pool makes LP tokens lose value. For example, if TON doubles in price, the gap between collateral and debt (LTV) shrinks by about 5.7%.
Debt increasesš
When you borrow tokens, your debt grows because of Organic APY. Right now, itās 3% for TON and 6% for USDT ā but these rates arenāt fixed and can rise!
Thatās why you shouldnāt borrow at 79% LTV ā over a year or even sooner, the gap between collateral and debt could shrink by more than 7%, leading to liquidationš„².
I think the optimal approach for this looping strategy is to borrow at around 60% LTV. How many cycles you do depends on your capital, since youāll also be spending quite a bit on blockchain feesšø.
