You can't crypto loop to $500k in outside funds. Let's say you can borrow fraction (1-r) of deposits (for some small r, could be 0 - in fractional reserve bank

You can't crypto loop to $500k in outside funds. Let's say you can borrow fraction (1-r) of deposits (for some small r, could be 0 - in fractional reserve banking monetary expansion, r is the "fractional reserve"). At time t0, you deposit 100 ETH, and borrow 99 ethereum worth of USDT. You loop that back into 99 ETH, and redeposit it. You have 199 ETH of assets, (99 EHT at time t0 of USDT) of debt (that you basically owe to yourself) - 100 ETH net, what you started with. You can now borrow an additional 98.1 ETH worth of USDT that you could spend on a house - less than the 100ETH you started with. Or you could redeposit that, to have 297.1 ETH total. But now, you can only borrow an additional 97.2 ETH. The total leverage on your ETH/USDT trade goes up, but the amount you can take out of the system (to, say, buy a house) can only stay the same or go down at each step through the loop.