9. Loop

Looping cryptocurrencies on Dough Finance, often referred to as "Leveraged Collateral Amplification," is an advanced strategy that utilizes flash loans to significantly increase your collateral by overcollateralizing your positions. This technique can enhance your ability to borrow and amplify potential returns, but it also comes with increased risks.

Step-by-Step Guide to Looping

Step 1: Initiate the Loop Process

1. Access the Loop Function: Navigate to the "Your supplies" section within your DeFi Smart Account (DSA) on Dough Finance. Here, locate and press the "Loop" button for the asset you wish to loop, in this case, ETH.

Step 2: Configure the Loop

1. Set the Multiplier: In the Loop popup, you can input the multiplier amount or use the slider to determine how much you wish to overcollateralize your position. Due to an existing debt of 6246 USDC, your ability to overcollateralize will be somewhat limited.

2. Confirm the Desired Multiplier: For this example, adjust the slider to overcollateralize your 10 ETH position to 28.8 ETH.

Step 3: Review and Confirm Loop

1. Review Loan Details: The confirmation popup will display critical information such as the potential liquidation price of your new position, the current and projected Health Factor (HF) Ratios.

2. Execute the Loop: Once satisfied with the settings, press the "Confirm Loop" button to initiate the transaction.

Step 4: Confirm the Loop Transaction

Monitor the Transaction: The loop involves taking a flash loan, buying additional ETH, and then adding it back as collateral. This all occurs in a single transaction to minimize risk and ensure the loan is repaid instantly. Once the transaction has finished and you see **"All done!"** press the Back button.

Step 5: Verify the Outcome

1. Check the Updated Balance: After the loop transaction, your total ETH holdings should increase significantly. In this scenario, due to a favorable drop in ETH price during the transaction, the outcome was 31.4753 ETH from the initial 10 ETH.

Step 6: Understand the Impact

1. Assess the Health Factor: Your HF will likely adjust close to 1.13, slightly lower than the anticipated 1.14, due to market volatility during the transaction.

2. Review Risks: Press on the "Risk Details" button to understand more about your current LTV and the liquidation threshold.

Benefits and Risks of Looping

Benefits

• Increased Collateral: Looping increases the total collateral you have, allowing for larger borrowing capacities.

• Leverage: Amplifies your investment capacity without requiring additional capital upfront.

Risks

• Market Volatility: Increases exposure to market fluctuations, which can affect collateral value quickly.

• Higher Liquidation Risk: The more you leverage, the closer you are to the liquidation threshold, which can trigger if the market moves against your position.

What’s Next?

Now that you've successfully implemented a loop strategy, you may want to consider how to unwind or "deloop" your position if needed. This involves reversing the loop process to reduce leverage and secure gains or minimize losses. Check out our "Deloop Guide" for step-by-step instructions on how to safely reverse a loop transaction.

Congratulations on leveraging the powerful looping feature on Dough Finance! As you continue to explore advanced DeFi strategies, always consider your risk tolerance and market conditions to make informed decisions.