Is it possible to know or estimate what % of TVL is leveraged?

How I understand one of the attractions of defi is that you can use crypto to get crypto, and you can then use that additional crypto to pump it back into defi, ie add leverage, with this leverage then being interconnected in a circular way throughout the defi ecosystem (and pumping the whole thing up like a balloon).

Question is – when we look at protocol TVL of £xbn, how it is possible to know or estimate the amount of leverage / the true TVL? For example a TVL of 1bn that has been levered up from eg 100k of onramped fiat, I think it’s hard to validly think of that protocol genuinely having 1bn of liquidity.

Note – I mention fiat onramping because TVL is always given in fiat, creating the impression that it was created with that value of fiat (whereas in fact that amount of fiat has never been added to the protocol, not even close).

Thanks in advance for any advice and suggestions.


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5 thoughts on “Is it possible to know or estimate what % of TVL is leveraged?”

  1. You may be confused between personal leverage and leverage LP in an AMM.

    Personal leverage I put eth in a mai vault and borrow dollars and buy more eth. I’m leveraged but AMMs aren’t affected.

    Using crypto to get more crypto in a sense that leverages the TVL of a AMM liquidity position is a specific kind of leverage. There are only so many truly decentralized ways to do this.

    Impermax allows you to do this. There are a few other platforms for leverage LP, but Impermax is the best one IMO DYOR. There aren’t that many tho.

    So you look on impermax, you’ll see how much is being borrowed across all pools on a AMM, and although that’s not a perfect 1:1, this amount borrowed is presumably turned into more LP token. In this situation, you get more LP by leveraging your LP.

    Use crypto to get more crypto is a real thing, but liquidity positions are made of multiple underlying and leveraging/borrowing against them is complicated. I’d be willing to bet there isn’t thaaaaat much protocol based defi leverage in AMMs. I could see there being a lot of toxic cefi leverage though which is a whole other ball game and you’ll never get to know those guys positions so🤗


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