# Cap stcUSD Adaptive Looing Vault *Maximize exposure to stcUSD organic yield through a capital-efficient recursive leverage strategy executed across dynamically selected money markets. * By [Ebisu Finance](https://paragraph.com/@ebisu-finance) · 2026-02-17 --- Today we’re introducing the first IPOR vault built curated by [**Sentinel**](https://sentinel.codes/): [https://app.ipor.io/fusion/ethereum/0xef53663bb775a51181f04d590f88fc38d6bd5751](https://app.ipor.io/fusion/ethereum/0xef53663bb775a51181f04d590f88fc38d6bd5751) A dynamically managed, leverage strategy developed in collaboration with **@capmoney\_**, **@ipor\_io**, **@morpho** designed to reflect a deliberate choice of prioritizing decentralized stablecoin primitives, transparent on-chain risk mechanics, and liquidity-aware execution. ![](https://storage.googleapis.com/papyrus_images/4e230ff5d2d00c936e545ac059623bc78581c0e3b95d792fd13070aadbcdf7e2.png) * * * ### **Our Partners** * [**IPOR Fusion**](https://app.ipor.io/fusion/) - ERC4626 Vaults infra provider Protocol; holding $200+M in strategies AUM. * [**Cap**](https://cap.app/) - First holistic covered credit application that is covered by financial guarantees; stcUSD issuer. * [**Morpho**](https://morpho.org/) - Modular lending market curated by institutional grade risk curators like Steakhouse, Gauntlet, Clearstar and more.  * [**Sentinel**](https://sentinel.codes/) \- An automation-first curator aimed at optimizing DeFi liquidity and yield strategies through proprietary algorithmic solutions. * * * ### **The Strategy** At its core, the Vault uses **Cap’s stcUSD** as the productive asset. stcUSD is **fully 1:1 USD-backed, always redeemable, and insured** through Shared Security Networks (SSNs) leveraging EigenLayer and Symbiotic. This vault is designed to maximize exposure to Cap’s stcUSD organic yield through a capital- and fee-efficient recursive leverage strategy executed across dynamically selected money markets.The vault programmatically compounds stcUSD exposure by routing borrowing loops across Morpho and Ebisu based on relative funding costs and available liquidity. ![](https://storage.googleapis.com/papyrus_images/89122ace5873d50889fb606370e37bebd31e7c9055a085fcb8740ebfb2ef3560.png) Read more about Cap on their docs: [https://docs.cap.app/protocol-overview/shared-security-networks](https://docs.cap.app/protocol-overview/shared-security-networks) stcUSD earns organic yield from [operators’ over-collateralized borrowing](https://docs.cap.app/protocol-overview/stcusd-mechanics) sourced from [**Cap’s Reserve**](https://cap.app/asset), forming the base carry of the strategy. [IPOR vault audit reports.](https://docs.ipor.io/build-on-fusion/developer-guide/audits) * * * ### **Adaptive Borrowing: The Morpho Market** The Vault deploys stcUSD as collateral to dynamically borrow USDC/USDT liquidity from **Morpho**, specifically through **Steakhouse-curated** [**stcUSD/USDT market**](https://app.morpho.org/ethereum/market/0xdbf4bc065d4e76f4505a523f2bba5e5ccdca94c16d67c3a6ff1dadbcbb26d4aa/stcusd-usdt) and [**Cap’s stcUSD/USDC market**](https://app.morpho.org/ethereum/market/0xeb17955ea422baeddbfb0b8d8c9086c5be7a9cfdefb292119a102e981a30062e/stcusd-usdc)**.** Borrowed USDT/USDC is wrapped into stcUSD and resupplied as collateral. This allows the strategy to: * Route leverage through the most cost-efficient money market at any given time * Access deeper liquidity when required * Preserve positive carry while maintaining conservative risk constraints * * * ### **Trove-Based, Fixed-Rate Looping: The Ebisu Path** The Vault deploys stcUSD as collateral inside **Ebisu’s Trove system**, a fixed-rate, CDP-style money market derived from [**Liquity**](http://liquity.org) mechanics. Against this collateral, the Vault borrows ebUSD at a **fixed rate**, auto-set on a weekly cadence. Rate setting incorporates: * Prevailing on-chain market rates * Observed ebUSD redemption activity * System-wide liquidity utilization With the explicit goal of sustaining positive carry between stcUSD yield and borrowing costs throughout each rate epoch. Borrowed ebUSD is swapped into USDC via the ebUSD/USDC stableswap pool on **Curve Finance**, wrapped back into stcUSD, and redeployed as collateral, creating a controlled, over-collateralized leverage loop. The selection between Ebisu and Morpho is fully automated and governed by real-time rate comparisons, liquidity availability, and protocol-specific risk parameters. * * * ### **Risk Management & System Feedback** Leverage decisions are governed by a fully automated off-chain controller that evaluates carry, peg conditions, and liquidity constraints in real time. Leverage is only expanded when borrowing rates remain below stcUSD yield, ebUSD trades above a defined peg threshold, and sufficient unwind liquidity exists across Cap reserves and AMMs. When any constraint is breached, the Vault immediately deleverages to a safer operating LTV. * * * ### **In Conclusion** This strategy allows the Vault to reliably earn competitive yields from multiple, orthogonal sources: * **stcUSD organic credit yield**, generated from over-collateralized operator borrowing sourced from Cap’s Reserve * **Dynamic carry from Morpho markets**, opportunistically sourcing stablecoin liquidity when Morpho borrow rates fall below prevailing stcUSD yield * **Fixed-rate carry from Ebisu Troves**, capturing the spread between stcUSD yield and auto-set ebUSD borrowing rates * **ebUSD peg arbitrage and redemption fees**, earned through systematic leverage and deleverage actions around peg deviations * **Protocol-native incentive programs**, including **20× xEBISU incentives** and **IPOR Points** accruing once the Vault exceeds **$100k TVL** Dynamically routing execution through multiple money markets to enables the most capital-efficiency. --- *Originally published on [Ebisu Finance](https://paragraph.com/@ebisu-finance/cap-stcusd-adaptive-looing-vault)*