PT Looping - up to 30% APR on USD
Overview
FIVA's integration with EVAA money markets enables PT tokens to be used as collateral, opening up a new advanced strategy: leveraged farming of PT rates. This allows you to potentially double or triple your returns on stable coins through leverage.
How PT Looping Works
The strategy leverages the spread between PT fixed yields and EVAA borrowing costs to amplify returns:
Basic Execution Steps
Buy PT tokens - Receive fixed yield (typically 10-15%)
Use PT as collateral - Deposit PT tokens in EVAA stable pool
Borrow stablecoins - Take loans in USDT or USDe
Repeat the cycle - Use borrowed funds to buy more PT tokens
Scale your position - Continue until desired leverage is reached
Token Flow Example
Buy PT-tsUSDe with your capital
Deposit PT-tsUSDe as collateral in EVAA
Borrow USDT (swap to USDe if needed, stake to tsUSDe)
Use borrowed tsUSDe to buy more PT-tsUSDe
Repeat for additional leverage
Profitability Mechanics
The strategy profits from the spread between PT yield and borrowing costs.
Example Calculation
Starting capital: $10,000 Strategy: 3x leverage on 10% PT yield with 5% borrow cost
Without leverage:
$10,000 staked at 10% = $1,000 annual return (10% APR)
With 3x leverage:
$30,000 PT position earning 10% = $3,000 annual return
$20,000 borrowed at 5% cost = $1,000 annual interest
Net profit: $3,000 - $1,000 = $2,000 on $10,000 (20% APR)
Result: Leverage doubles your APR from 10% to 20%
When Strategy Works
The strategy is profitable when:
PT yield > Borrowing rate: Positive spread creates profit opportunity
Stable borrowing costs: Predictable interest expenses
Sufficient liquidation buffer: Safe collateral ratios maintained
Risk Assessment
PT looping adds significant risks to the base PT strategy:
Liquidation risk: EVAA can liquidate your collateral if PT value drops
Variable borrowing rates: Interest costs can increase, reducing profitability
EVAA smart contract risk: Exposure to money market protocol risks
Oracle risk: Price feed failures could trigger unwanted liquidations
PT price volatility: Can trigger liquidation even with fixed underlying yield
Liquidity constraints: Large positions may face exit difficulties
Risk Management
Some tips:
Maintain safe collateral ratios
Monitor borrowing rates regularly for profitability changes
Set up alerts for collateral ratio approaching liquidation levels
Keep emergency funds for additional collateral if needed
Strategy Suitability
Best for: Experienced DeFi users comfortable with:
Multiple protocol interactions
Active position monitoring
Higher risk tolerance
Understanding of liquidation mechanics
Not suitable for:
New DeFi users
Those seeking passive strategies
Risk-averse investors
Conclusion
PT looping can significantly amplify returns by leveraging the spread between fixed PT yields and variable borrowing costs. While the strategy can double or triple your APR on stablecoins, it introduces substantial additional risks including liquidation, variable rates, and multi-protocol exposure. Only experienced users with strong risk management skills should attempt this advanced strategy.
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