> For the complete documentation index, see [llms.txt](https://doc.torch.finance/telegram-usd/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://doc.torch.finance/telegram-usd/how-tgusd-works/use-cases/defi/leverage-yield-farming.md).

# Leverage Yield Farming

Leverage yield farming is a capital-efficient strategy that involves borrowing assets to amplify one's liquidity position in a pool (LP), thereby earning higher returns from farming incentives and trading fees. When the strategy is implemented in a **market-neutral** manner—meaning long and short exposure are balanced—the goal is to earn yield steadily while minimizing the impact of asset price fluctuations.

At the same time, this strategy contributes to the **health of the tgUSD ecosystem** by deepening the liquidity of tgUSD/stgUSD pools, reducing slippage during swaps, and increasing the borrowing demand for tgUSD and stgUSD. This demand reinforces minting activity and drives up overall TVL .

## How It Works:

**Process:**

* Borrow assets (e.g., stablecoins or others) to expand the capital base, typically using 2× leverage → resulting in a 3× leveraged position
* Supply both own capital and borrowed funds into a high-yield LP
* Maintain a market-neutral position, focusing purely on farming and fee yields without directional exposure to price movements

#### Yield Sources:

* Leverage magnifies the base APY (e.g., 5% becomes 15% at 3× leverage), but net returns must account for borrowing interest, which may reduce the final yield.
* LP rewards and trading fees

#### Risks:

* Rising interest rates may erode profits or cause losses
* Severe price fluctuations may trigger liquidation risks
* Providing liquidity still exposes users to **impermanent loss**

## **Example: Leveraged Yield Farming with stgUSD/USDT**

**Assumptions:**

1. USDT maintains a stable value at $1
2. stgUSD / USDT = 1.06

Alice applies a **market-neutral strategy** using 3× leverage:

<table><thead><tr><th width="144.14453125"></th><th width="151.5859375">Alice’s Own Capital</th><th>Assets Borrowed</th><th width="157.640625">Total Supplied to LP</th><th>Position Delta</th></tr></thead><tbody><tr><td>USDT Amount</td><td>1000 ($1000)</td><td>500 ($500)</td><td>1500 ($1500)</td><td>1000 USDT (stable, treated as neutral)</td></tr><tr><td>stgUSD Amount</td><td>0</td><td>1415 ($1500)</td><td>1415 stgUSD ($1500)</td><td>0 stgUSD (neutral)</td></tr></tbody></table>

* Alice borrows 500 USDT and approximately 1415 stgUSD (worth $1500 at 1.06 each)
* She combines her own capital and borrowed assets to provide liquidity to the stgUSD/USDT pool
* While the position is notionally long on USDT, its stable value implies negligible price volatility risk, preserving the market-neutral structure
* This approach exposes Alice only to impermanent loss and interest rate risks, while virtually eliminating directional price risk—making it well-suited for conservative yield farming