Directional Loop Strategy
This strategy uses ZonaLoop to create 3x leveraged exposure to GM: ETH/USD tokens, capturing amplified price exposure to ETH, protocol fees, and trader PnL dynamics.
The Setup
The user has $30,000 of GM: ETH/USD tokens and wants 3x exposure to ETH price movements, accumulated protocol fees, and trader counterparty dynamics.
GM Token Value Drivers
Approximately 50% exposure to WETH price changes: The pool maintains roughly equal USD weights of long (WETH) and short (USDC) tokens, creating partial directional exposure to ETH movements
Aggregate Fee Revenue: Position fees (opening/closing trades), borrowing fees (hourly charges on open positions), liquidation penalties, and swap fees continuously accrue to the pool, typically generating 10-15% baseline APR
Trader PnL Settlement: The pool serves as counterparty to leveraged traders. When traders lose money (through liquidations or unprofitable closes), those losses flow directly to LPs; when traders profit, those gains are sourced from the pool
The Execution
Flash Loan: Protocol temporarily borrows $60,000 USDC (converted to GM; user provides $30k GM, flash loan provides $60k GM, making up $90k GM in total)
Deposit: $90,000 worth of GM: ETH/USD deposited as collateral in ZonaLend
Borrow: Protocol borrows $60,000 USDC against your collateral
Repay: $60,000 USDC immediately repays the flash loan
Your Final Position
Collateral: $90,000 GM capturing aggregate fee revenue and ETH exposure
Debt: $60,000 USDC borrowed at ~5% APR (~$3,000 annual cost)
Net Exposure: $30,000 equity with 3x leverage to GM token performance
Leverage: 3x
Directional exposure: Long (amplified exposure to ETH price, fee accrual, and trader PnL dynamics)
12-Month Scenario Analysis
| Metric | Bull Market Scenario | Bear Market Scenario |
|---|---|---|
| ETH Price Move | +50% | -50% |
| GM Price Exposure (50% of ETH) | +25% | -25% |
| Base Fee Accrual | +10% | +10% |
| Projected Trader PnL Impact | -6% (trend-following traders profit) | +10% (liquidation cascade) |
| Total GM Token Return | +29% | -5% |
| Scenario | Initial Equity | Collateral Value* | Debt | Borrow Cost** | Net Equity | Return |
|---|---|---|---|---|---|---|
| Bull: Just Holding | $30,000 | $38,700 | $0 | $0 | $38,700 | +29% |
| Bull: ZonaLoop 3x | $30,000 | $116,100 | $60,000 | -$3,000 | $53,100 | +77% |
| Bear: Just Holding | $30,000 | $28,500 | $0 | $0 | $28,500 | -5% |
| Bear: ZonaLoop 3x | $30,000 | $85,500 | $60,000 | -$3,000 | $22,500 | -25% |
| *$90,000 base × total GM return (1.29 or 0.95) **5% APR on $60,000 debt over 12 months | ||||||
Key Insights
This directional long approach captures the full volatility of boosted GMX LP tokens. In the bull scenario, 3x leverage transforms a 29% increase into a 77% return, outpacing simple buy-and-hold strategies. Even in adverse conditions, the 10% baseline fee accrual from position fees, borrowing fees, and swaps provides a natural yield cushion. However, users must always be aware that any losses to the GM token are also amplified when using this strategy.
Important Risk Note
This is a directional strategy - losses are also amplified 3x. It requires active monitoring of Health Factor during volatile periods. Suitable for users with higher risk tolerance and understanding of GM token dynamics. Consider starting with lower leverage (1.5x-2x) to understand position behavior before moving to higher leverage.