TLDR: In this post we provide a general market update and update on the Flagship vaults, there is growth across the board and across virtually all metrics. Moreover B.Protocol and Block Analitica will submit a cap of 16K ETH on February 22nd at 1PM CET for the sDAI market to deliver on our promise to include blue-chip stablecoin collateral markets.
Market update
General market metrics - growth across the board
Total deposits in Morpho Blue have reached over 120M$ growing 50% in the last 2 weeks alone.
This is in part due to volatile asset prices generally increasing but also to inflows in MetaMorpho vaults and Morpho Blue markets. The Flagship vaults co-curated by Block Analitica and B.Protocol have seen the most significant growth across all volatile and stable asset vaults in the last week.
Borrows on Morpho Blue have reached 50M$, increasing 60%+ since our last update, with 54% coming from the wETH/wstETH market to which bbETH is the biggest supplier.
Similarly to total deposits, growth in USD is partly due to prices generally increasing but also to inflows of borrowers and incremental risk taking.
The recent addition of WBTC collateral markets led by bbUSDT and bbUSDC has added significant collateral and borrows to Morpho Blue and propelled WBTC to be the second most popular collateral on Morpho Blue.
MetaMorpho vaults continue to be the primary and preferred way lenders earn on Morpho, with 99%+ of the borrowable assets supplied through MetaMorpho vaults and with our Flagship vaults comprising 74% of the total borrowable assets.
Flagship ETH
Recently we’ve listed a new market on bbETH: rETH 94.5%, see our post on the governance forum detailing our rationale, although we expect the rETH collateral market to be a significant allocation of bbETH in the future, only a small allocation has been made to that market, more will be allocated as inflows continue and borrowing demand emerges.
bbETH suppliers are earning yield on their ETH greater than that of any LST considering only liquid rewards and interest from Morpho Blue borrows. bbETH is beating by far any supply rate at this scale across lending markets. In addition to this yield users have been earning MORPHO rewards at the rate of ~90 MORPHO/1000$ supplied.
Total deposits in bbETH have remained in the same range for the past two weeks, while on the other hand the wstETH collateral market to which bbETH is the largest supplier has grown significantly both in dollar terms and in ETH terms.
During this period the spread between borrow and supply rates in the wstETH market has shrunk significantly thanks the market reaching its target utilization even as bbETH has continued to grow its allocation there.
The main underlying market to which bbETH is exposed to is the wstETH collateral market, along with bbETH the supply of borrowable assets has remained relatively constant in the last two weeks. However borrows have steadily grown, with borrows growing 30% in ETH terms in the last two weeks alone.
Borrow rates have grown to come in line with borrowing rates similar to other lending platforms but with higher utilization making the spread smaller while keeping the LST loop profitable for borrowers.
Borrowers are still taking full advantage of the high LLTV of the wstETH collateral market as can be seen on this collateral at risk chart. These positions do not present solvency risk at this, as per our last market update the collateral available for liquidation within reasonable price drops is small relative to on-chain liquidity.
However we do recommend these users add collateral to their positions to avoid getting liquiditated in case of adverse market conditions, as a reminder the oracle is market-based, read our recent post on the difference between market and exchange rate oracle for wstETH.
As mentioned in our blog post, Block Analitica’s view is that lending protocols should use an exchange rate oracle for the major LSTs as secondary market price at scale is unsustainable for LST looping, other pairs like wstETH/USDC and wstETH/USDT should be subject to market volatility.
In the coming weeks and with developments of the Morpho stack in the pipeline we will outline a plan for the vault to transition.
Flagship USDC
bbUSDC has seen tremendous growth in the last two weeks, growing from 1.5M to over 5M in deposits with the last week alone.
The main allocation of bbUSDC remains in the wstETH collateral market.
In the wstETH/USDC market
Borrows of USDC in the wstETH collateral market have gone up significantly, with as much as 50% within the last week alone. Similarly to our previous market update risks of insolvency remain contained as the market size relative to the DEX liquidity is fairly small.
In the WBTC/USDC market
Borrows in the WBTC collateral market although still under utilized are growing steadily. The growth of bbUSDC has been primarily driven by it being a first mover in the WBTC collateral market, increasing significantly MORPHO rewards to bbUSDC LPs while retaining yield from the wstETH market. Overall bbUSDC is earning 340 MORPHO/1000 $ for its LPs on top of the yield from Morpho Blue, of which the lion’s share is coming from the WBTC collateral market.
The liquidation curve for the WBTC collateral market is well distributed and with the current size of the market it poses no insolvency risk for bbUSDC.
Flagship USDT
Similarly to bbUSDC, our newest vault bbUSDT has seen significant growth in the past week alone, growing from 1M to over 5M in deposits.
bbUSDT’s primary allocation is in the WBTC market
In the WBTC/USDT market
Borrows of USDT in the WBTC market have grown steadily over the past week and kept up well with the flow of supplies in the market. Similarly to bbUSDC, the growth of bbUSDT has been primarily driven by it being a first mover in the WBTC collateral market, giving bbUSDT LPs access to 480MORPHO/1000$ supplied on top of Morpho Blue yield.
Borrowers in the WBTC market are among the most conservative across Morpho Blue markets, with the bulk of liquidation volume concentrated around a 40% price drop. Similar to the WBTC/USDC market, given the well distributed liquidation curve and the size of the market relative to on-chain liquidity, this market poses no solvency risk at this time.
In the wstETH/USDT market
Borrows in the wstETH market have grown over the past week and although in very small size they have not kept up with the flow of supplies leading to under utilization of the market.
General comments on the rates and competitiveness
Borrow rates generally in Morpho Blue have remained under market. Users today are able to take leverage on their crypto collateral with USDC or USDT with sub 5% borrow rates whereas rates in DeFi sit around 10% for these same stablecoins. This is an attractive proposition for borrowers as they get cheaper leverage on their collateral allowing for Morpho Blue to grow its borrower base.
The borrow rates being under market was expected to happen as lenders are generally willing to accept a lower supply rate if compensated by incentives. It’s important to note that this trend will continue in full force throughout March as incentives once again grow, leading to more supply and more borrows thanks to the implicit discount lenders are willing to take.
However there is still room for improvement in some markets, the spread between market rates and Morpho Blue rates taking into account only liquid rewards is too wide in some cases, reallocations in the concerned markets will be reflected.
To understand the dynamics of lenders in this phase of Morpho Blue and MetaMorpho it’s important to have a framework to value MORPHO tokens. Users can add an FDV for MORPHO on the Morpho Labs front end and it will show you a net APY assuming this valuation and with incentives. Even with conservative assumptions, all Flagship MetaMorpho vault LPs have vastly outperformed suppliers to other lending platforms all while segregating risks across different assets, this leaves significant room for the Flagship MetaMorpho vaults to grow further ahead of the next phase.
bbETH: sDAI market listing
Block Analitica & B.Protocol will submit a cap of 16K WETH to bbETH on February 22nd at 1PM CET for the sDAI(86%) market to deliver on our promise to include the first blue-chip stablecoin collateral market as the market continues to grow, our rationale is detailed below.
Rationale
While most of the liquidity in bbETH is allocated to the wstETH market and the rETH market has been recently listed we think this is the right time to list the sDAI market to have the possibility of adding exposure to a major blue-chip stablecoin in the future.
sDAI is the biggest stable yield bearing asset in DeFi today with over 820M DAI locked in sDAI earning 5%, and over 1.1B DAI in the DSR, on-chain liquidity for sDAI/WETH is similar to that of DAI/WETH and they have a similar risk profile as well.
As stated bbETH’s main exposure will remain in blue-chip LST collateral markets. However stablecoin collateral market yields for WETH in the long run are expected to outpace those of LST collateral markets, with small allocations in those market these will bring a boost to the yield of all bbETH LPs.
Market Parameters
Loan token: WETH - 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
Collateral token: sDAI - 0x83F20F44975D03b1b09e64809B757c47f942BEeA
Oracle: Morpho Chainlink - 0x89064883cf21BD8977fCfFd326E75805dc47b3d9
IRM: Adaptive Curve IRM - 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
LLTV: 86%
Listing parameters
SupplyCap: 16K WETH
LP Veto
As a reminder any LP that opposes a new supply cap being submitted can set a vote to veto the new cap following this tutorial and using this snapshot space.
For live accurate data on Morpho Blue and MetaMorpho refer to our dashboard.
For any questions or feedback feel free to get in touch with us here or on our social platforms.