Yield Sensitivity and Break-Even Threshold

We now examine how low LVF yield can drop before a self-lending LVF position reaches its break-even point.

In this model, where User A’s net cost of capital is highlighted in the table at varying borrow rates but assuming the same split of external vs self-lending. Any LVF yield above this breakeven point transforms the position into a yield-generating opportunity and conversely, any yield below this threshold effectively behaves as a funding rate, or a net cost for holding leveraged exposure to the asset.

This distinction is especially relevant in LVF, where not all participants are yield farmers. Some may be seeking to leverage long exposure to an asset, while others such as protocols sourcing liquidity may tolerate mild funding costs as a more cost-effective manner of liquidity sourcing vs existing models such as bribes or yield farming.

The ability to support sustainable leveraged positions makes LVF a flexible and capital-efficient tool in a variety of strategic contexts.

Comparative Break-Even Thresholds by Borrow Rate

Borrow Rate	Annual Interest Paid	Net Cost (after Self-Lending)	Break-Even LP Yield
50%	$2,500	$700	7.0%
40%	$2,000	$560	5.6%
30%	$1,500	$420	4.2%
20%	$1,000	$280	2.8%
10%	$500	$140	1.4%

📌 As borrowing costs decline, the LP yield required to break even falls sharply, reaching as low as 1.4% at a 10% borrow rate. This reinforces the robustness of self-lending under varying market conditions.