The flywheel

The liquidity created at graduation is burned: nobody can withdraw it. So the 0.20% of every swap that stays in the pool has nowhere to go — it simply makes the reserves larger, permanently.

Because every risk limit is a fraction of those reserves, a deeper pool raises everything at once: how much can be borrowed, how large a position may be, how much leverage is available. More trading makes the market able to carry more trading. Leverage multiplies this, because a levered trade puts several times your own capital through the pool and pays the fee on all of it.

Buying pushes the price up, and the tokens you just bought are worth more at that new price. Once the 10-second average confirms the move, that gain is real collateral and it does support a larger position. This is not a loophole; it is what holding an appreciating asset means.

The question is whether it runs away. It does not, because borrowing power is capped by what your collateral could actually be sold for into this pool — and your own buying does not add liquidity to sell into, only price.

When someone else buys, their money is really in the pool. That lifts the price and the borrowing capacity of everyone holding it, so a dollar of genuine demand turns into several dollars of buying pressure.

It runs in reverse just as hard. A dollar of selling forces several dollars of deleveraging, which is why liquidation is chunked and priced off an average rather than the last trade.

Leverage cannot exceed what has been supplied. A market with no USDT lenders offers no leverage; one with no token lenders cannot be shorted. The constraint on how far any of this goes is not a formula in the program — it is how much capital people have chosen to put behind that particular token.