Stablecoin volumes have remained subdued since the liquidations two weeks ago and rates on Term have remained relatively steady, with stablecoin rates ranging between 6-7%, offering a slight premium compared to variable rate borrow/lend protocols. Demand to borrow against USD0++ remains a bright spot with $1.5mm cleared against $4mm in total demand at a 13.55% rate, up 55bps from the week prior. ETH markets saw a slight tick up in volume but otherwise remains low relative the recent peaks.
In derivatives markets, 3-month basis fell by -50 basis points and perpetual funding decreased by -60 basis points over a 30-day trailing period. Spot perpetual funding rates remain highly volatile, ranging from a low of -2.3% to a high of 9.23% in the past seven days.
Despite this volatility, DeFi and derivatives rates as measured over a 30-day trailing window continue to move with high correlation.
While its hard to make out any clear trends from the perpetuals data, 3 month basis rates show a clear trend lower and are on the cusp of dipping below Fed Funds rates, a poor sign.
Focusing in on the DeFi variable rate market, USDC borrow rates fell -50bp on the week to close at 6.27% on a 30-day trailing basis, and -14bp 5.39% on a spot basis.
Utilization continues to grind lower, down 2% to 73% the week prior on account of declining borrow demand,
while borrow / supply spreads remain steady.
Until markets take a turn up, expect stablecoin rates and stablecoin rate volatility to remain subdued in DeFi.
Turning to ETH rates markets, ETH rates held steady, with rates falling by just -1bps on a 30-day trailing basis, week over the week.
Intraday volatility show no signs of stress or instability,
and market internals show that both borrow demand and supply continue to increase in lockstep.
It is surprising to see that ETH rates remain elevated despite the overall lack of demand for leverage and anecdotal evidence suggests that this is primarily due to demand to borrow against EtherFi’s weETH.
High level, DeFi money markets followed crypto markets lower this week, in constrast with last week's divergence, where crypto assets experienced a sharp relief rally that DeFi money markets did not participate in. Looking back, it appears that DeFi markets had a more accurate read on overall market sentiment. Looking forward, keep an eye out for a more sustained rally for rates to pick up. Until then, rates are likely to remain low.
