How to Use OKX Loop Investment? Looping, Liquidation, and Redemption

OKX

28 September 2026

OKX's Loop Investment is essentially an automated looping strategy: you deposit asset A, the system puts it into a lending protocol as collateral, borrows asset B, swaps B back into A, and deposits it again — repeating this process for the number of loops you choose. It compresses what would normally require multiple manual steps of "deposit — borrow — swap — deposit again" into a single transaction.

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How It Works and What You Actually Get

Loop's returns come from "interest earned on staked assets" minus "borrowing costs." When you choose the number of loops, your position size gets amplified, but the borrowed amount also grows proportionally. If the borrowing rate exceeds the staking yield, your net return will drop or even turn negative — Loop is not a principal-protected product.

One common point of confusion: if you deposit USDG or USDT into a PT Loop, the system will generate two tokens: PT-USDG and YT. Only PT-USDG counts toward your Loop position. The remaining YT stays in your wallet and is not included in the position's displayed value. So you may see "position value lower than the amount you deposited" — this is normal. Do not sell or transfer out the YT, otherwise your later redemption may fail or require extra steps.

Health Factor: The Core Metric for Liquidation Risk

The Health Factor measures how far your position is from forced liquidation. It is calculated based on collateral value, debt value, and the liquidation threshold. The higher the number, the safer you are. When it drops below 1, your position becomes eligible for liquidation.

Several actions can improve your health factor: reducing the number of loops, adding more collateral, or repaying part of the debt. If you see your health factor steadily declining, it is usually because borrowing interest is accumulating or your collateral's price is falling.

When Liquidation Happens and What Occurs After

When the health factor drops below 1, the lending protocol will start liquidating your collateral to repay the debt. The liquidation process works like this: the system sells your assets in order from highest to lowest liquidity, prioritizes repaying the least liquid liabilities first, converts them into USDT as an intermediate asset, and then repays the debt. Liquidation incurs penalties, including liquidation fees and additional slippage buffers.

Loop liquidation occurs at the underlying lending protocol level (such as Aave) and is not the same mechanism as OKX exchange's credit lending liquidation. You do not need to understand OKX's "risk unit" terms — you only need to watch the health factor shown on your position page.

Redemption: Available Anytime, But With Conditions

You can initiate redemption at any time from the position page. The system will close the loop position, repay the debt, and return the remaining assets to your wallet.

However, redemption may not always succeed. The following situations can cause redemption to fail or be delayed:

Health factor is too low
Lending protocol has insufficient liquidity
Trading slippage exceeds the limit

If redemption fails, you need to first reduce the number of loops, add more collateral, or repay part of the debt, then try again.

The final amount you receive is affected by market price, slippage, and liquidity, and may not equal the amount you originally deposited.

PT Tokens Are Not Automatically Handled After Expiry

This is the easiest place to make a mistake: after PT expires, the system will not automatically redeem or close your Loop position. You must actively operate on the position page.

If you do nothing, staking yields and borrowing interest will continue to accumulate according to protocol rules, but PT promotional rewards will stop being distributed. New subscriptions for the current product may be paused before expiry. Existing positions will not automatically renew, and the final returns and credited amounts are subject to actual execution results.

A Common Subscription Restriction

ETH and USDG Loop products cannot be subscribed to at the same time. The reason is that they use different Aave E-Mode categories, and the same wallet address can only enable one E-Mode in the same Aave market. If you already hold one position and want to subscribe to the other, you must first fully redeem it or use a different wallet address.