A. It may just be more comfortable for him!
It is possible that your Shepherd is just trying to form a nice comfy den for himself, and does so by balling up, circling over or curling under a blanket. If the behavior is not linked to any other issues such as other changes in habit or signs of illness, then he is just fine doing what he is doing. You may want to offer him a nice big comfy bed to lay on which may stop him from using your rugs instead.
However, if you are concerned, it doesn't hurt to speak to your vet!
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