Term achieved a record breaking week, with clearing volumes exceeding $10M+ across USDC and ETH markets. Borrowers rolled over and increased their carry positions against USD0++, deUSD, and weETH at 13%, 10.5% and 3%, respectively, as the floating rate markets in these assets hover precariously about the kink.
For those that missed this week’s auction, users now get a second bite at the apple. In another protocol first, Term launched its Blue Sheets - simple earn page (app.term.finance/earn), designed for users don’t have time to monitor auctions (not available to U.S. persons).
In derivatives markets, funding rates continue to march upward, with 3-month basis rising +59bps to 8.97% on a 30-day trailing basis and perpetual funding rates rising by +69bps to 9.67% on a 30-day trailing basis.
DeFi rates appear to be keeping up, with the passthrough rate steady at historical norms.
With the election in the rearview and BTC through all-time highs, expect derivatives rates to continue its steady climb upward.
Turning to DeFi variable rate markets, floating rates keep pace with its derivative counterparts, with USDC borrow rates rising +49bps on the week to close at 7.02% on a 30-day trailing basis. On a shorter lookback period (just seven days) Aave rates averaged 7.59% on the week.
The 7-day average, however, masks significant intraday volatility throughout the week with utilization oscillating wildly about the kink.
The frequency, duration and magnitude of intraday swings is unlike anything seen in recent history - far outpacing that seen during Q1/Q2 bull run earlier this year.
The ONLY day where rates did not spike upwards of 50-60% intraday was November 3, the day before the election.
Turning to ETH markets, ETH rates appear to be turning over, with rates dipping -11bps to 2.73% on a 30-day trailing basis. While the CESR staking index has fallen over the same period, it fell by just -4bp to 3.24% on a 30-day trailing basis.
Despite this decline, total ETH borrow remains at all time highs, closing the week at 1.272M ETH in total outstanding debt. ETH supply simply increased a tad faster than demand, which tracks given the bullish tone in cryptoasset markets.
With utilization coming off the kink, intraday volatility remained well behaved throughout the week.
With uncertainty surrounding the Presidential Election lifted this past Tuesday, BTC managed to rally through resistance at previous all-time highs, definitively, to close the week at ~$76k. Despite this notable breakout, perpetual funding rates are nowhere near the Q1 peak in the 30%+ range. To the contrary they remain relatively steady in the low teens, suggesting that this move is not driven by excessive leverage and therefore not to be faded. With this outlook in mind, expect markets to continue to rise in the near and medium term and DeFi rates along with it.
