You have a lot of spot assets during a bear market—besides holding onto them waiting for a bull market, what else can you do?
The loan agreement might be the answer. As one of the most fundamental underlying financial services, loan agreements put idle assets to work, establishing a sustainable on-chain cash flow for long-term holders through the low-risk 'deposit and lend the same' strategy.
This article briefly introduces the mechanisms of loan agreements and shares low-risk allocation strategies suitable for diamond hands.
Mechanism breakdown: Essential loan knowledge for beginners
When users deposit collateral, they typically earn interest. Suilend, NAVI, and AlphaLend on Sui operate under this mechanism.
Loan-to-Value Ratio (LTV) and Health Score
Each asset has a different loan-to-value ratio (LTV). Conceptually, this means if you deposit BTC versus a meme coin, the former allows you to borrow a higher proportion of assets because it's more trustworthy. The latter only allows borrowing a small amount due to a higher risk of sharp price drops leading to insufficient collateral value.
Example: Deposit SUI, LTV at 80%. Deposit FUD, LTV at 10%
After starting to lend out assets, health score will be generated—commonly understood as the ratio of borrowing capacity to debt. The more you borrow or the lower the collateral value drops, the lower the health score becomes, bringing you closer to liquidation.
Example: Deposit 100U of SUI, LTV at 80%, so up to 80U of USDC can be borrowed.
If you choose to borrow 60U of USDC, the health score is 1.33 (= 80U / 60U).
Additionally, the deposited SUI earns interest while the borrowed USDC accumulates debt.
Note: Liquidation usually does not happen exactly when the health score drops to 1, so always keep a buffer.
2. Revolving loans and revolving loan strategies (Suilend Strategies / NAVI Strategies)
In the past, Suilend and NAVI supported revolving loans—meaning the assets you lend out can be redeposited, then borrowed again, and so on.
This method can trigger a chain reaction when prices drop sharply, so operations require extreme caution. Currently, manual revolving loans offer no incentives and are not recommended.
Example: Lend 60U of USDC, convert it into SUI, then deposit to earn interest, and use that to borrow more assets—repeating this cycle.
However, Suilend and NAVI now offer automated strategies—toggle manual revolving loans with one click. These strategies can boost position returns, but the risks are significantly increased due to revolving loans. We won't go into detail here.
3. Mechanism博弈: Finding the balance between 'funds utilization' and 'asset safety' on Scallop
Scallop adopts a different mechanism: users must deposit non-interest-bearing collateral into the collateral pool to borrow. With collateral in place, the same LTV applies, allowing asset borrowing.
For regular deposits, funds go into the lending pool for interest generation only, and cannot be used as collateral.
Example 1: Deposit 100U of SUI into the collateral pool, borrow 60U of USDC, and use it elsewhere. Here, SUI earns no interest, while USDC generates debt.
Example 2: If SUI is deposited into the lending pool, it earns interest but cannot be used as collateral to borrow USDC.
To encourage continuous user participation in lending, Scallop allocates more funds to subsidize lenders—up to four times the incentive interest for lenders. This means, although borrowing creates debt, the extra interest boost makes you want to keep borrowing.
To get higher multiple rewards from lending, you need to collateralize SCA tokens—assess price volatility and lock-up mechanisms carefully.
Example: Lend 60U of USDC. Even though USDC generates debt, the additional SUI rewards exceed the accumulated debt, resulting in profit.
In contrast, Suilend, NAVI, and AlphaLend also have similar reward mechanisms. Users gain protocol subsidies through lending activities, which helps increase overall capital utilization and activates the lending ecosystem.
Example: Borrowing 60U of USDC creates debt, but the additional sSUI rewards compensate for the debt, resulting in profit.
Strategy building: From grabbing airdrops to earning interest spreads, a low-risk cash flow approach
From the above context and current environment, we can draw three conclusions:
Currently, the main incentives across protocols are centered around lending activities; pure deposit returns are relatively limited. To farm project subsidies, you must participate in lending.
The lowest risk is simply depositing into the lending pool—similar to saving money—without needing to worry about health score.
Next level of risk is depositing and borrowing the same type of asset, such as depositing sSUI and borrowing SUI—less concern for volatility, with larger health score buffer.
So applying this to various protocols, here’s how I proceed:
Suilend, NAVI, AlphaLend: Convert SUI into sSUI/haSUI/vSUI/stSUI, deposit into the protocol, lend out SUI, then transfer to another protocol or a second wallet within the same protocol to farm interest. As long as interest income from deposits exceeds interest expense from lending, it's profitable. Similarly, depositing USDC and lending out suiUSDT follows the same logic.
Scallop: Convert SUI to haSUI on Haedal, deposit into Scallop's collateral pool, lend out SUI, then deposit into Scallop's lending pool—this allows farming both the lending rewards and deposit interest. Be especially mindful that lending rewards come from SCA collateral staking; the official site provides a calculator—recommended to simulate costs first. Rewards are adjusted weekly, so keep an eye on official announcements.
After setting your position, just periodically check health score and reward changes.
Cycling through cycles: Why lending agreements are the best 'cash flow machine' for long-term investors?
Since starting dollar-cost averaging in 2023, I've been holding a large amount of spot assets sitting idle on Binance. For diamond hands, besides holding until the bull market peak and selling, it seems there's nothing else to do.
But the lending agreement gave me this way out: besides holding, I can also farm.
As long as risk is properly managed, lending agreements are ideal for long-term participation.
Yet during this period, I still saw many community members suffer from failed lending agreements. Here are four ideas I'd like to share with everyone:
Don't be overconfident in your health score—don't borrow excessively just for higher returns, as it could collapse your health score.
Borrowing the same type of asset, such as depositing USDC and borrowing USDT, or depositing sSUI/haSUI and borrowing SUI
Meme coins should only be deposited—don't borrow or collateralize them, as you never know when they might spike or crash
Don't play revolving loans, don't play revolving loans, don't play revolving loans
Follow these builders—they are all top-tier protocol teams worth watching.
The four lending protocols are highly active on X, including renowned builders. Below are their official and team accounts—recommended to follow and learn from.
Suilend: Team members @0xrooter @gidwell
NAVI: Team members @elliscopef @charlesdotxyz @Carl0w0
AlphaLend: Team members @0xrajendra @0xaradhana
Scallop: Team members @djchrisssssss @0x_ZHUANG @ChrisEryx
Conclusion: Put idle assets to work
Lending agreements aren't complicated—they're essentially about putting idle assets to work.
Rather than letting spot assets sit idle on exchanges, put them into these protocols to farm gradually. Returns won't make you rich overnight, but they're stable and controllable—ideal for those who don't want to monitor the market daily.
Of course, with proper risk management—such as keeping sufficient health score buffer, borrowing the same type of asset, and avoiding revolving loans. As long as these three basics are met, lending agreements can serve as a relatively low-risk, long-term cash flow machine.
Stay present, stay rational, let time become your friend.
Not financial advice. This post is for research and discussion only. DYOR first.
The protocol ranking in this article is based on DefiLlama TVL as of January 2026, with no recommendation order.
🐧 About Little Penguin Abi: Former Sui ambassador, current Walrus ambassador, independent DeFi researcher.
