f(x) Protocol - Leveraged ecosystem vault

Strategy fxLOOP runs a leveraged USDC carry trade on f(x) Protocol yield. The vault supplies collateral on Morpho, borrows USDC against it and loops it back into collateral up to the target leverage. It earns the spread between the collateral yield and the USDC borrow rate, multiplied by the leverage. Two collateral legs, allocated to whichever offers the better carry:

• fxSAVE: f(x) Protocol's auto-compounding savings token backed by the fxUSD stability pool, earning a variable yield.
• PT-fxSAVE: the Pendle principal token of fxSAVE, locking in a fixed yield until maturity.

Risk management Leverage is not fixed. The leverage is adjusted depending on the live spread between fxSAVE yield and Morpho USDC borrow rates. It adds leverage when the carry is wide and deleverages when borrow rates rise or the spread compresses. This is a high leverage vault. Any sustained fxUSD depeg could lead to liquidations.

Key risks

• Liquidation risk: a drop in fxSAVE's value or an oracle deviation can trigger liquidation of the Morpho position.
• Rate risk: if USDC borrow rates rise above fxSAVE yield, the carry turns negative until the position is deleveraged.
• Liquidity risk: unwinding depends on Morpho market liquidity and fxSAVE redemption, which can delay withdrawals.
• Smart contract risk across f(x) Protocol and Morpho