Loop
Loops are structured products that enable one-click, leveraged exposure to yield-bearing assets such as JLP, liquid-staked SOL, and other tokenized yield primitives. By looping, users borrow more of the same asset they deposit, creating a compounding position where both the initial and borrowed tokens earn yield.
Loop positions can be:
- Market-neutral: stablecoin or staked-asset loops
- Directional: including long or short-biased positions on volatile assets
Loopscale uses fixed-rate loans to power Loops, helping to mitigate rate volatility that can otherwise erode leveraged returns. Learn more about the mechanics behind Loops here.
Open and Manage Loop Positions
- Visit the Loops page in the Loopscale App.
- Choose a Loop. See Loop Types for more detail.
- Review whether the position is market-neutral or price-sensitive.
- Select your leverage. Higher leverage increases both yield and liquidation risk.
- Choose optional settings: Slippage tolerance and fixed-rate duration (longer durations reduce rate risk, but may have higher rates)
- Confirm and execute the transaction.
- Visit the Loops page in the Loopscale App.
- Choose a Loop. See Loop Types for more detail.
- Review whether the position is market-neutral or price-sensitive.
- Select your leverage. Higher leverage increases both yield and liquidation risk.
- Choose optional settings: Slippage tolerance and fixed-rate duration (longer durations reduce rate risk, but may have higher rates)
- Confirm and execute the transaction.
Managing your Loop is important, especially for directional positions. You can monitor and adjust your position from the Portfolio page or directly within a Loop’s detail view.
Track leverage, liquidation threshold, and projected yield based on current rates and optionally top-up collateral to reduce leverage and improve loan health or refinance (if available) to adjust term or improve cost basis. For more detail, see Managing Loans.
Risk Management
Loops introduce amplified exposure. While they are designed to boost returns from yield-bearing assets, they also come with meaningful risks:
- Asset price volatility: Directional Loops (e.g. long or short) can be liquidated if the underlying asset moves against the position.
- Yield vs. borrow rate mismatch: If your asset’s yield drops below your fixed borrow rate, the strategy may become unprofitable.
- Liquidity constraints: AMM liquidity must be sufficient to open or unwind Loop positions. If unavailable, users may face slippage or need to wait.
Loopscale mitigates rate volatility using fixed-rate loans, but users should still monitor Loop health and understand the risks involved. See additional considerations on the Risk Management page.
Understanding Returns
Loop P&L depends on:
- The yield rate of the asset being looped
- The borrow rate and fixed duration
- The chosen leverage multiplier
- Any associated fees (origination, slippage, early unwind)
A Loop is profitable when the compounded yield on the looped tokens exceeds the borrow costs and any third-party fees to open or close the position (such as swap fees). Yield is typically more likely for assets with high or stable base yields.
Loop Types
Different Loops have distinct risk profiles and performance dynamics based on the yield asset and debt asset.
Loops on tokens like mSOL, JupSOL, or restaking tokens earn a spread between staking yield and borrow rate.
- Yield Source: Staking rewards
- Liquidation Risk: Not based on price volatility — driven by staking yield falling below borrow cost or validator underperformance
- Best Use: Capital-efficient compounding of stable staking yields
Loops on tokens like mSOL, JupSOL, or restaking tokens earn a spread between staking yield and borrow rate.
- Yield Source: Staking rewards
- Liquidation Risk: Not based on price volatility — driven by staking yield falling below borrow cost or validator underperformance
- Best Use: Capital-efficient compounding of stable staking yields
These use LP tokens from perpetuals platforms like JLP or FLP to amplify exposure to trading fee revenue.
- Yield Source: Perp trading fees
- Liquidation Risk: High — depends on price movement of underlying assets
- Position Bias: Directional (not market-neutral)
Loop LP tokens from dynamic DEXes like MLP (Meteora), to compound fee revenue.
- Yield Source: DEX trading fees
- Liquidation Risk: Price movement of the LP token; not neutral
- Use Case: Similar to Perps LPs but from spot DEX exposure
Loops on Principal Tokens (PTs) that trade at a discount to their face value and redeem 1:1 at maturity.
- Yield Source: Fixed income (discount to par)
- Liquidation Risk: Low if LTV < 80% — price closely tracks SOL unless market reprices yield aggressively
- Full APY is only realized if held to maturity. Early exit may return less than projected yield.