🔹 What is Recursive Borrowing?

Recursive borrowing, also known as **lending loops**, is a **highly profitable DeFi strategy** where traders **borrow against their own collateral**, redeposit the borrowed funds, and repeat the process to **maximize lending yields and liquidity mining rewards**.

🔹 How Does Recursive Borrowing Work?

By **repeatedly borrowing and supplying assets**, whales **boost their effective capital** while benefiting from DeFi incentives.

📌 Example of a Lending Loop on Aave:

Imagine a whale has **$10,000 USDC** and wants to **maximize returns**.

1. 💰 **Deposit $10,000 USDC into Aave to earn interest.**
2. 🔗 **Borrow $7,500 USDC against the deposit.**
3. 📥 **Redeploy the borrowed USDC into Aave.**
4. 🔄 **Repeat the process multiple times.**
5. 🎉 **Earn interest on the total deposited amount while keeping the borrowed funds.**

✅ Best Platforms for Lending Loops

These DeFi platforms allow **safe recursive borrowing**:

• 🔹 **Aave (AAVE)** – The top lending protocol with high collateral efficiency.
• 🔹 **Compound (COMP)** – Offers high APY and liquidity incentives.
• 🔹 **Venus (XVS)** – BSC-based lending with high yield opportunities.
• 🔹 **Abracadabra Money (MIM)** – Allows leveraging of stablecoins.

⚠️ Risks of Recursive Borrowing

While recursive borrowing amplifies gains, it carries risks:

• ⚠️ **Liquidation Risk** – If collateral value drops, positions may be liquidated.
• ⚠️ **High Borrowing Costs** – Interest rates may fluctuate, reducing profitability.
• ⚠️ **Smart Contract Vulnerabilities** – Bugs or exploits could cause fund loss.

🚀 How to Get Started with Lending Loops

Follow these steps to execute a successful lending loop:

1. 📥 **Choose a Lending Platform** – Aave and Compound are great options.
2. 🔗 **Deposit an Asset as Collateral** – Use a stablecoin or high-liquidity token.
3. 💰 **Borrow Against the Collateral** – Keep a safe Loan-to-Value (LTV) ratio.
4. 🔄 **Redeploy Borrowed Funds** – Repeat the process to amplify yield.
5. 📈 **Monitor Risks & Adjust Accordingly** – Avoid liquidation by maintaining a buffer.

🔗 Learn More About Whale Strategies

Lending loops are just one of many whale strategies. Explore more DeFi tactics here:

Back to Whale Strategies ➜