Looping and Leveraged Exposure

Looping is a leveraged yield strategy that uses ONyc as collateral to increase exposure to its underlying yield. Rather than simply holding ONyc, users deposit it into a supported lending protocol, borrow against that collateral, and use the borrowed funds to acquire additional ONyc. This process can be repeated to build a larger yield-bearing position than the user's initial capital would otherwise allow.

Looping is supported through integrated lending protocols such as Kamino and Loopscale. By increasing exposure to ONyc, users can amplify returns when ONyc's yield exceeds borrowing costs. Because the strategy relies on leverage, it also increases liquidation risk and requires ongoing management of borrowing costs and loan health.

How It Works

Deposit ONyc as Collateral

Users begin by depositing ONyc into a supported lending protocol, where it serves as collateral for a loan.

Borrow Against the Position

Using the deposited ONyc as collateral, users borrow an eligible asset, typically a stablecoin such as USDC.

Increase Yield Exposure

The borrowed funds are used to acquire additional ONyc, increasing exposure to ONyc's underlying yield without requiring additional capital.

Repeat the Process

The newly acquired ONyc can also be deposited as collateral, allowing the borrowing and redeployment process to be repeated until the desired leverage is reached.

Risks

Because looping relies on collateralized borrowing, positions may be liquidated if their loan-to-value (LTV) exceeds the protocol's liquidation threshold. This can occur if borrowing costs accumulate faster than ONyc's NAV growth or if collateral values decline relative to outstanding debt.

Returns are also sensitive to changes in borrowing rates. If the cost of borrowing rises above the yield generated by ONyc, the strategy may become less profitable or unprofitable. In addition, opening and closing leveraged positions depends on sufficient market liquidity, and users remain exposed to the smart contract, oracle, and operational risks of the protocols used within the strategy.