🏦Money Market–based
Leverage created by looping collateral and debt through lending protocols like Aave
Last updated
Leverage created by looping collateral and debt through lending protocols like Aave
Last updated
TLDR
Built using lending protocols like Aave.
Leverage comes from looping: deposit collateral → borrow → buy more → repeat.
Costs = borrow interest (often cheaper than perps).
Exposure = directly long on the collateral asset.
Current max leverage: up to 3x long; up to -1x short.
Collateral (e.g., ETH) is deposited into a lending protocol.
Stablecoins (e.g., USDC) are borrowed against the collateral.
The borrowed stablecoins are used to buy more of the collateral asset.
Steps 1–3 are repeated (“looped”) until the target leverage is reached.
Toros automates this process inside an ERC-20 token.
Example: a BTCBULL2X token backed by Aave loops WBTC as collateral against borrowed USDC until the position reaches ~2x leverage.
Cheap Debt-Based Leverage: Borrowed funds usually carry lower costs than perp funding, helping reduce overall decay.
Downside Liquidation Protection: Toros rebalances debt positions dynamically, keeping leverage in safe ranges. No forced liquidations in 4+ years of live trading.
Intelligent Leverage Adjustments: Leverage is only rebalanced when it drifts outside a predefined band (e.g., 2.8x–3.2x for a 3x Bull). This minimizes unnecessary rebalancing, lowering both borrowing costs and volatility decay.
Volatility Decay: Sideways or choppy markets can still cause underperformance due to:
Borrowing interest.
Rebalancing costs.
Compounding effects of leveraged exposure. Learn more →
Maximum Leverage:
On Aave, the practical limit is 3x long due to conservative liquidation thresholds.
On the short side, while -2x is possible in theory, Toros caps shorts at -1x for safety.
Higher leverage (e.g., 4x) is possible with perpetuals-based tokens, covered in the next section.
Interest rate spikes can increase borrowing costs.
Stablecoin depeg risk if borrowed asset loses its peg.
Smart contract risk from Aave.
Mechanism: looping collateral and debt via money markets.
Costs: borrow interest (generally cheaper than perps).
Risks: interest spikes, stablecoin risk, protocol risk.
Use case: trending markets where debt-based leverage is efficient.
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