The High-Stakes World of DeFi Looping: How Two Traders Turned ETH into $120 Million

In the ever-evolving landscape of decentralized finance (DeFi), innovative strategies emerge that push the boundaries of traditional investing. One such strategy, known as “looping,” has recently caught the attention of the crypto world after two Ethereum traders reportedly used it to turn their investments into a staggering $120 million. This high-risk, high-reward approach demonstrates both the potential and the perils of DeFi, offering a glimpse into the complex world of crypto trading.

Understanding Looping

Looping is a sophisticated DeFi strategy that involves repeatedly supplying and borrowing the same asset on a lending platform. These platforms typically reward both lenders and borrowers with their native tokens, creating an opportunity for savvy traders to maximize their yields. The process is akin to a financial Russian nesting doll, with each layer adding to the potential rewards — and risks.

Here’s a simplified breakdown of how looping works:

1. Initial Deposit: A trader deposits a certain amount of cryptocurrency (let’s say Ethereum) into a lending platform.

2. Borrowing: The trader then borrows against this deposit, usually up to a certain percentage determined by the platform’s loan-to-value (LTV) ratio.

3. Re-depositing: The borrowed amount is then re-deposited into the same platform.