Summary
As the combined TVL of ETH, USDC, and EURC vaults saw significant growth hitting the all-time-high of ~$230m in November, the allocation model for Moonwell Flagship vaults worked as designed, ensuring yield maximization based on current borrowing demand.
Alongside frequent reallocations in November, Block Analitica and B. Protocol team executed a few notable parameters adjustments for both growth and security reasons, with more details available below.
Month in review - November 2024
November saw a net growth of Moonwell Flagship vaults on Morpho’s Base deployment, with a slight decrease in the stablecoin vaults while ETH vault saw inflow of over 3k of ETH which can be justified with the bullish market sentiment during November having users seeking for yield on volatile crypto assets:
ETH: 24.8k → 28k (13% increase)
USDC: 53.6m → 48.3m (10% decrease)
EURC: 12.4m → 11.9m (4% decrease)
At the moment of writing, a total TVL of Moonwell Flagship vaults is $166.26m (including the newly launched Moonwell Frontier cbBTC vault).
Market-driven Reallocations
The Block Analitica team recently shared an update on our allocation model for Moonwell Flagship vaults. The model is now optimized for yield, alongside making sure looping strategies such as leveraged staking strategy on Morpho are profitable, all while accounting for external borrow rate benchmarks across DeFi.
In November, over 200 reallocation transactions were executed, aiming to maximize yield for all Moonwell Flagship vaults on Base according to the new reallocation model.
As Block Analitica’s Morpho Dashboard shows, November saw a significant increase in borrowing demand across all Flagship vaults following the shift of market conditions. This resulted in both USDC and EURC vaults being almost 100% utilized for a prolonged period of time, spiking the APY from 0.6% (Nov 1) to 5.9% (Nov 30) for the USDC vault, and from 0.16% to 2.12% for the EURC vault. This trend continued so far in December, with the native APYs being at 8.3% and 7.6% for USDC and EURC vaults respectively, and 15% and 17.5% if we include WELL incentives.
Meanwhile, despite the fact that the Moonwell Flagship ETH vault on Base has almost 16k of ETH in the idle market, it currently offers >7% net APY, and significant liquidity for the LST loopers on Base.
At the time of writing, there are 4 markets on Base seeing seeing impactful borrowing demand:
-
wstETH/ETH (exchange rate) market with $26m borrowed
-
cbBTC/USDC market with $26.3m borrowed
-
cbETH/USDC market with $14.5m borrowed
-
cbETH/WETH (exchange rate) market with $11.5m borrowed
As of now, the Moonwell Flagship vaults represent 79%, 93.5%, 59%, and 95% of supply share in those markets respectively, and will continue to provide liquidity to a DeFi blue-chip collateral in a yield-optimized way, respecting the established conservative approach to risk curation.
Parameter Changes and Proposals
During November, there were few parameter adjustments made on Moonwell Flagship vaults on Morpho’s Base deployment:
- Increased wstETH/ETH supply cap to 30k due to increased borrowing demand
- Proposed continuation of WELL rewards (forum post, snapshot vote, onchain vote)
- Reduced supply cap for rETH/ETH market on ETH vault from 1k to 500 ETH due to low onchain liquidity
Furthermore, we’ve done an analysis on the supply cap changes for the cbETH, cbBTC, wstETH, and WETH markets for USDC vault due to increased USDC borrowing demand seen in November.
The changes are outlined below:
- Increase supply cap for cbETH, cbBTC, and WETH markets for USDC vault by 30m USDC from 20m to 50m USDC
- Increase supply cap for wstETH market on USDC vault by 10m USDC from 20m to 30m
Next Steps
Please feel free to comment or ask any question you may have regarding the reallocation model, parameter changes in this thread or via DMs, we’d be happy to hear and address them in a timely manner.
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.