Looping / Recursive Lending Calculator
Free DeFi looping calculator. Recursive borrow → re-deposit for amplified yield. Compute effective leverage, net APR, and liquidation distance.
Looping amplifies both yield and risk. Single liquidation can wipe out the position. Use only with stable→stable or correlated assets. Monitor health factor daily.
How to use Looping / Recursive Lending Calculator
The Looping / Recursive Lending Calculator is designed to turn raw assumptions into a clear decision framework in seconds. Start by entering conservative values first, then run a second pass with aggressive assumptions to understand your outcome range. This two-pass method gives you a realistic baseline and an upside case before you commit capital. In practice, strong decision-making comes from comparing scenarios rather than trusting one single output. For that reason, this calculator updates in real time and allows fast iteration so you can test multiple cases with minimal friction.
A reliable workflow is: define your objective, set your constraints, enter values, review outputs, then validate with one related calculator. For example, if your target result looks attractive, verify it against <a href="/break-even-calculator/">break-even</a>, fee, and <a href="/tax-calculator/">tax</a> assumptions before acting. This process prevents overconfidence and helps you avoid weak setups where small hidden costs can erase expected edge. By using repeatable steps, you make your analysis consistent and easier to improve over time.
Input guide and assumptions
Input quality determines output quality. Use exchange-confirmed prices when possible, and avoid relying on a single quote snapshot during high volatility. If your scenario includes fees, funding, spread, or slippage, include them explicitly — a quick pass through the <a href="/profit-calculator/">profit calculator</a> with realistic friction will reveal whether your edge survives after costs. Even small percentage costs compound quickly in leveraged or high-frequency conditions. A robust habit is to increase friction assumptions slightly above your best-case expectation to stress-test the model. If the setup still works with conservative assumptions, execution risk becomes more manageable.
Time horizon matters as much as price assumptions. A strategy that looks viable on a one-week horizon can fail over a three-month period due to cumulative costs and market drift. For longer holds, run a parallel check with the <a href="/dca-calculator/">DCA calculator</a> to see how staged entries compare to a single lump-sum commitment. Align your inputs with your intended hold period and re-check when conditions change materially. If market structure changes, rerun the same scenario rather than forcing old assumptions into a new environment. This discipline keeps your planning adaptive and reduces avoidable losses from stale numbers.
Reading your loop position
Looping (recursive lending) amplifies yield by depositing → borrowing → re-depositing in a loop. Each iteration adds leverage. Theoretical max leverage = 1/(1−LTV). At 80% LTV: 1/(1-0.8) = 5x max. At 60% LTV: 2.5x. At 40%: 1.67x. Higher LTV = higher leverage but smaller liquidation buffer.
Net APR = supply_APY × leverage − borrow_APR × (leverage − 1). At supply 8%, borrow 5%, leverage 4x: net = 32% - 15% = 17% APR. Higher than simple supply (8%) but with significant liquidation risk if collateral drops 25%+ (depending on loan-to-value drift).
Loop strategy scenarios
Conservative ETH-stETH loop: deposit $10K stETH (4% APY), borrow ETH (3% APR) at 70% LTV, swap to stETH, redeposit. After 2 loops effective leverage ~2.4x. Net APR ≈ 4% × 2.4 - 3% × 1.4 = 9.6% - 4.2% = 5.4%. Modest amplification of stETH yield with manageable de-peg risk.
Aggressive ETH-USDC loop: deposit $10K ETH (3% supply), borrow USDC (8% borrow) at 75% LTV, swap to ETH, redeposit. 4 loops = 3.5x leverage. Net APR = 3% × 3.5 - 8% × 2.5 = 10.5% - 20% = -9.5% (negative carry!). Loop only profitable when borrow_APR < supply_APY, which is rare for non-correlated assets.
Risk and execution checklist
- Before looping: 1) Verify supply APY > borrow APR by comfortable margin (5%+ minimum). 2) Check liquidation LTV vs target LTV — target should be 10-20% below liquidation. 3) Calculate cost of liquidation event (penalty 5-10% of position) vs amplified yield. 4) Test with small $1K loop first to validate the workflow.
- Asset correlation matters most. ETH-stETH loop has tight correlation (rare de-peg events) — safe up to 3x leverage. ETH-USDC loop requires ETH price stability — dangerous above 2x because ETH moves can liquidate before earning enough yield.
Looping mistakes that liquidate
- Looping uncorrelated assets aggressively. Borrowing ETH against BTC collateral at 4x leverage means a 20% BTC drawdown coincident with ETH rise = liquidation. The 'amplified yield' becomes amplified loss in adverse markets.
- Ignoring borrow rate volatility. Aave/Compound rates spike during high utilization (sometimes 30%+ APR briefly). A loop profitable at 5% borrow becomes ruinous at 25% borrow. Set alerts for rate changes and have a deleveraging plan ready.
Loop profitability benchmarks
Typical looping setups (May 2026): stETH-ETH loop 2-3x → 5-8% net APR (low risk), ETH-USDC loop 2x → -5% to +5% APR (rate-dependent), BTC-USDC loop 2x → -3% to +7% APR. Higher leverage requires constant monitoring or automation (DeFi automation tools like DeFi Saver).
Liquidation distance benchmarks: 4x leverage = liquidation if collateral drops ~22%, 3x = ~30%, 2x = ~45%. ETH 30-day historical max drawdown often 15-25% — 4x leverage on ETH-USDC is statistically borderline.
Execution templates you can reuse
Recursive workflow: 1) Deposit collateral on Aave/Compound. 2) Borrow at target LTV (e.g., 75% of collateral value). 3) Swap borrowed to more collateral (or same if matching pair). 4) Re-deposit. 5) Repeat 3-5 times for desired leverage. Use protocols with 'one-click leverage' (Instadapp, DeFi Saver) to compress to single transaction.
Risk management: set health factor alerts (warn at 1.5, deleverage at 1.3, force-exit at 1.1). Maintain 10-20% emergency liquidity in stable wallet to add collateral or repay if liquidation imminent. Never use full LTV cap as target.
Data hygiene and model maintenance
Daily monitoring required for any leveraged position. Health factor changes with both price and accrued interest. Even at 2x leverage, ignoring for a week during volatility can result in liquidation.
Tax considerations: each loop iteration may trigger taxable events (swap to different asset). In jurisdictions where wrapped tokens are non-equivalent (US treats stETH ≠ ETH), looping creates tax friction even before yield realization.
Final validation before capital deployment
Sanity check: deposit $10K, LTV 60%, 3 loops. Each loop adds 60% of previous step. Total collateral = 10000 × (1 + 0.6 + 0.36 + 0.216) = $21,760. Total borrow = 10000 × (0.6 + 0.36 + 0.216) = $11,760. Effective leverage = 21,760 / 10,000 = 2.18x. Health factor = 21760 × 0.85 / 11760 = 1.57 (healthy).
Post-loop validation: actual leverage = total_collateral_value / equity. Net APR = (collateral × supply_APY - borrow × borrow_APR) / equity. Cross-check with protocol UI which shows effective rate. Discrepancy >5% indicates miscalculation of fees or compounding.
Frequently asked questions
What is yield looping in DeFi?
Looping (recursive lending) amplifies yield by depositing collateral, borrowing against it, swapping the borrowed asset back to collateral, and re-depositing — repeated multiple times. Each iteration adds leverage. Net APR = supply_APY × leverage − borrow_APR × (leverage − 1). Common on Aave, Compound, Morpho.
What is the maximum safe leverage for looping?
Theoretical max leverage = 1 / (1 − LTV). At 75% LTV: 4× max. At 80% LTV: 5×. Safe leverage for sustained holding: 50-70% of max (so 2.5-3.5× at 80% LTV). Going above leaves insufficient buffer for adverse price moves and liquidation risk grows non-linearly with each additional loop.
When is yield looping profitable?
When supply APY exceeds borrow APR by sufficient margin (5%+ ideally). Common profitable setup: stETH (4-5% APY) collateral, borrow ETH (2-3% APR), leverage 2.5-3× = net 6-10% APY. Stablecoin loops (USDC/DAI) profitable when stablecoin APYs spike during high utilization periods. Always check live rates — they change daily.
What is the liquidation risk in looping?
Higher leverage = smaller buffer before liquidation. At 4× leverage with 80% LTV liquidation threshold, your collateral can drop only ~22% before liquidation. ETH has historical 30-day max drawdowns of 15-25%, making 4× borderline. Use health factor alerts (warn at 1.5, deleverage at 1.3) and maintain stable wallet liquidity for emergency repayments.
Is stETH looping safe?
Among the safer loop strategies because stETH-ETH correlation is tight (rare de-peg events). Historical max de-peg: ~7% in May 2022 during 3AC/Celsius crisis. Modern stETH operations are more robust. Safe leverage: 2-3× on stETH-ETH. Higher leverage (4×+) still vulnerable to acute liquidity events that can de-peg stETH temporarily.
How are looped positions taxed?
Tax treatment varies by jurisdiction. In the US, IRS generally treats: (1) swap between wrapped tokens as taxable event even if functionally equivalent (e.g., ETH → stETH), (2) borrowing is not taxable but interest is not deductible for personal use, (3) liquidation triggers capital gain/loss on liquidated collateral. Consult a crypto-tax specialist for your specific country.
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