> ## Documentation Index
> Fetch the complete documentation index at: https://docs.agi3.ae/llms.txt
> Use this file to discover all available pages before exploring further.

# Looping

> Recursive borrowing to multiply exposure and the spread on it: the mechanics, the ceiling, and the specific ways a leveraged loop fails.

Looping, or recursive borrowing, uses borrowed funds to increase a position in the same asset you already hold, repeating the cycle until exposure is a multiple of capital. It is the leveraged form of the [yield spread](/strategies/yield-spread): the same two floating legs, run recursively on a growing base.

AGI3 does not provide looping as a product feature. There is no one-click loop, no automated leverage, and nothing in the platform that maintains, rebalances, or unwinds a looped position for you. Everything described here is constructed from the ordinary supply, borrow, and swap actions and managed entirely by you. This page exists so the mechanics and the failure modes are clear before you attempt it.

## What it is

One cycle, starting from an asset that earns yield:

1. Supply the asset as collateral.
2. Borrow a stablecoin against it.
3. Swap the borrowed stablecoin back into the first asset.
4. Supply the proceeds as additional collateral.

You now hold more of the yield-bearing asset than you started with, and you owe the borrowed asset. Repeat, and exposure grows while each cycle adds less than the last. The intent is the spread on a larger base: if the collateral yields more than the debt costs, multiplying the collateral multiplies the spread, and [Net APY](/earning-yield/net-apy) shows how a small spread presents as a double-digit return on equity.

## Mechanics on AGI3

* The loop is built by hand from [supply](/how-to/supply-assets), [borrow](/how-to/borrow-against-collateral), and [swap](/how-to/swap-assets). Each leg is its own transaction with its own network fee, and the swap leg's price impact recurs every cycle.
* Each cycle is bounded by the market's max borrowable LTV, so the amounts shrink geometrically. At the 80% max LTV of a blue-chip market, the theoretical ceiling on total exposure is 5× your starting capital.
* The ceiling is unreachable in practice. The 3% safety margin trims every borrow, swap costs consume part of each cycle, and approaching the ceiling drives the health factor to 1.00 and then below it. The last cycles add little exposure and most of the fragility.

## When it fits

Conviction in a yield-bearing asset, a spread wide enough to survive the per-cycle costs, and a mandate that tolerates leveraged single-asset exposure with no automated backstop. Looping is a leveraged position in a single asset; size it as you would size any leveraged single-asset trade.

## What it costs

* Swap fees and price impact on every cycle, compounding across the loop.
* The floating borrow rate on the full recursive debt.
* Network fees on every leg, several legs per cycle, in both directions: the exit repeats the legs in reverse.

## How it fails

* The health factor compresses with every cycle, and this is the defining risk. A single position at half its ceiling absorbs a price move that liquidates a looped book sitting near the maximum.
* Losses are leveraged too. At 5× exposure, a 10% fall in the collateral is a 50% loss of equity, before liquidation penalties.
* The spread inverts. Both rates float, and if the borrow cost rises above the collateral's yield, the loop bleeds at leveraged scale; the mechanics are the [yield spread's](/strategies/yield-spread) inversion, multiplied.
* Concentration earns no credit. Looping concentrates the book in one asset by construction; the [portfolio health score](/risk/portfolio-health-score) scores that near zero on concentration, and its crash-day scenario shocks every derivative of an asset together, because wrappers of the same asset do not diversify.
* Unwinding is not symmetrical. The loop is built at leisure in calm markets, while unwinding means repaying debt to release collateral, which can mean swapping at exactly the moment spreads widen and liquidity thins. The exit is slower and more expensive than the entry, and there is no automated unwind to fall back on.
* A depeg breaks the premise. Looping a derivative against its underlying assumes the two track each other; if that relationship breaks, LTV moves sharply with no move in the underlying at all.

## Managing it

Stop well short of the ceiling; nearly all of the risk sits in the last cycles. Decide the target health factor before the first cycle and treat it as a hard floor. Keep uncommitted assets available to post, because a looped position that cannot be topped up has only one exit. Monitor the collateral price and both rates on the routine in [Monitor positions and alerts](/how-to/monitor-positions), since either rate moving can turn the position loss-making without any price action. And know the unwind sequence before it is needed.