This is an advanced guide. It assumes you know how Aqua positions quote against your wallet balance and how supplying and borrowing work on Aave. Everything below uses Aave v3 on Ethereum and one real position from July 2026, with every address withheld. Aave V4, live on Ethereum since March 2026, is a separate deployment with its own parameters, and this guide does not cover it.
The idea in one picture
When you supply tokens to Aave, the pool holds the tokens and mints aTokens into your wallet: aEthWETH for WETH, aEthUSDT for USDT. aTokens are ordinary ERC-20 tokens that grow with supply interest, and the 1inch token list carries them, so Aqua positions can quote directly against your aToken balance. One balance, two earning sources: Aave interest keeps accruing while Aqua fees land on every fill.
How a leverage loop works
A loop turns one deposit into several. You supply collateral, borrow against it, supply what you borrowed and borrow again. Each round is smaller than the last because the loan-to-value cap takes a slice every time.
- 1
Supply WETH to Aave
The pool mints aEthWETH into your wallet. As of July 22, 2026, the WETH loan-to-value cap on Aave v3 Ethereum core is 80.5%, with the liquidation threshold at 83%.
- 2
Borrow stablecoins
The debt starts accruing the borrow rate while the aWETH keeps earning supply interest. Stay well below the cap: the gap between your loan-to-value and the liquidation threshold is your whole safety margin.
- 3
Re-supply what you borrowed
Supplying the borrowed stablecoins mints aEthUSDT or aEthUSDC and raises your borrowing power for the next round.
- 4
Repeat to your target size
The studied wallet ran four rounds in under three hours: it supplied 95.67 WETH, about $185K, and finished with about $430K of borrowed and re-supplied stablecoins.
How much a loop multiplies depends on the loan-to-value you use per round. At 75% the geometric limit is 4x your starting tokens, at 80.5% it is 5.13x, and inside the ETH-correlated E-Mode at 93% it reaches 14.29x. Four rounds at those caps deliver 3.05x, 3.39x and 4.35x. The multiplier applies to everything: interest, fees and losses alike.
Two variants are worth knowing. E-Mode groups correlated assets, wstETH against WETH for example, and raises the caps to a 93% loan-to-value with a 95% liquidation threshold on Ethereum core as of July 2026. And flash-loan tooling can open the whole loop in one transaction instead of round by round. Both raise the same question this guide keeps coming back to: how far can price move before the position breaks.
Adding Aqua on top
Once the loop is built, the aTokens sit in your wallet doing nothing else. Aqua puts the same balance behind swap positions: aEthWETH against aEthUSDT, aEthUSDT against aEthUSDC, any pair from the Aave collateral you hold. The studied wallet backed positions on three aToken pairs from one balance.Read how one balance backs many positions.
- Aave supply interest keeps accruing on every aToken, whether or not a fill happens.
- Each fill pays your position's fee inside the executed price, and a fixed share of that fee goes to the 1inch DAO.
- The position builder reads your wallet, so pairs come straight from the Aave collateral you already hold.
- The only permission Aqua holds is a revocable allowance on each aToken. Revoking it stops new fills instantly.
One real position, step by step
The timeline below replays a real Ethereum wallet through July 2026, reconstructed from public on-chain data with every address withheld. It supplied WETH, looped stablecoins four times, backed Aqua positions with the aTokens and was partially liquidated four days later.
- July 15, loop opened
- 95.67 WETH supplied, about $185K, then four borrow and re-supply rounds added about $430K of stablecoin debt and collateral. Health factor 1.18, with room for WETH to fall 48.8% before liquidation.
- July 15 to 17, fills rotate the mix
- Aqua fills sold about $83K of stablecoins for 44.43 aWETH as ETH drifted lower. The price buffer tightened from 48.8% to 34.2%.
- July 19, 21:00 UTC, collateral moved out
- About $96K of aUSDT left the wallet, 70 minutes before the liquidation. Aave allowed the transfer because the health factor stayed just above 1.0, and the price buffer collapsed to 0.2%.
- July 19, 22:09 UTC, liquidation
- A liquidator repaid $215K, half of the debt, and took 120.79 aWETH at a 5% bonus. The penalty: $10,767 of collateral gone beyond the debt repaid.
- July 20 to 22, the aftermath
- The remaining positions kept filling. With most of the WETH collateral gone, the stablecoins cover the smaller debt on their own, so no WETH price can liquidate what is left.
Read the order of causes carefully. The loop opened with a thin-sounding health factor of 1.18, but the stable-heavy collateral meant ETH had to fall almost by half before liquidation. Two days of fills rotating stablecoins into aWETH tightened that buffer to about a third. What broke the position was the collateral transfer: it cut the buffer from 34.2% to 0.2% in one move, and an ordinary price wiggle did the rest.
The liquidation math
Aave liquidates when the health factor drops below 1.0. The health factor is your liquidation-threshold-weighted collateral divided by your debt. With a single volatile collateral against stablecoin debt the buffer is simple: the price can fall by 1 minus 1 over the health factor before liquidation. A health factor of 1.05 survives a 4.8% drop, 1.5 survives 33.3% and 2.0 survives 50%.
Mixed books do not follow the simple curve. Stablecoin collateral absorbs debt on its own, so the same health factor can hide very different price buffers: the studied wallet's 1.18 came with a 48.8% buffer, while a pure WETH book at 1.18 survives only a 15.3% drop. Compute your own numbers with the planner below, and re-check them whenever fills rotate your mix.
Plan a loop
Set the starting tokens, pick a collateral class and see what the loop produces: total exposure, debt, the health factor at entry, the price drop it survives and the carry at your rates. Everything runs on this page and nothing is sent anywhere.
Three ways to run it
The combination scales from no debt at all to a tight correlated loop. Pick the shape by the risk you accept, not by the multiplier you can reach.
| Supply only, no loop | Correlated E-Mode loop | Cross-asset loop | |
|---|---|---|---|
| What you hold | aTokens from a single supply, no debt | Correlated collateral and debt, wstETH against WETH for example | Volatile collateral against stablecoin debt, the case-study shape |
| Liquidation risk | None. With no debt there is no health factor to defend | Low while the pair stays correlated, but caps run to 93% so small de-pegs bite | Full price exposure, and the multiplier applies to every move |
| What can trigger it | Nothing on the Aave side | The correlated asset de-pegging, or borrow rates outrunning the collateral's interest | A price drop, a rate squeeze or your own collateral withdrawals |
| On the Aqua side | Every aToken can back positions, and fee income has no debt cost to beat | Pegged-pair positions fit naturally on correlated aTokens | Volatile pairs pay richer fees but rotate your collateral mix with every fill |
| Fits when | You want two earning sources with no liquidation risk | You understand de-peg risk and watch rates daily | You accept leveraged price exposure and monitor the buffer, not just the health factor |
Risk checklist before you loop
- Size the buffer, not the health factor: know the exact price at which the health factor reaches 1.0 and keep meaningful room to it.
- Check the carry: borrow rates float, and a loop whose borrow rate outruns its interest income pays for its own exposure. The multiplier applies to the bleed too.
- Expect fills to rotate your collateral toward the falling asset, and re-check the buffer after volatile days.
- Treat collateral withdrawals as the sharpest lever you hold. The studied wallet's transfer cut its buffer from 34.2% to 0.2%.
- Aave governance moves loan-to-value caps, thresholds and bonuses. The figures on this page are as of July 22, 2026. Verify them before you size anything.
- Watch both dashboards: the Aave health factor and your Aqua coverage. Top up or unwind before either turns critical.
Frequently asked questions
No. Aqua positions carry no debt: they quote against your wallet balance under a revocable allowance, and Aave reverts any aToken transfer that would push your health factor below 1.0, so a fill cannot break the loan. What fills do change is your collateral composition, which can tighten or widen your price buffer over time.
A liquidation takes seized aTokens straight out of your wallet, so positions quoting that aToken lose their backing and stop filling, exactly like any underfunded position. Nothing is liquidated on the Aqua side: positions backed by your remaining balances keep working, and the studied wallet kept filling on its stablecoin pairs after the event.
Any aToken on the 1inch token list works like a normal wallet token, aEthWETH, aEthUSDT and aEthUSDC among them. Pick pairs from the Aave collateral you already hold when you create positions, and mind that static or wrapped variants are different tokens from plain aTokens.
Sources
Back a position with tokens you already hold
The position builder reads your wallet, aTokens included, and suggests pairs from what it finds.
