Monthly Risk Report (January 2026)
Prepared as an independent, market-by-market risk assessment of Moonwell’s core markets on Base, based on on-chain data as of 28 January 2026. A separate report will cover the protocol’s core markets on Optimism.
Executive Summary
This assessment provides a market-level view of Moonwell’s risk posture as of late January 2026, based on observed utilization, liquidity conditions, collateral composition, interest-rate dynamics, and protocol parameters across the core markets on Base.
Overall liquidity remains ample and utilization is conservative in most pools. However, risk is concentrated in a subset of markets and is increasingly driven by asset concentration and configuration constraints rather than by system-wide leverage.
Several markets warrant particular attention this month:
- USDC remains the protocol’s primary liquidity backbone with 71.0% utilization, thin effective liquidity buffers (~29%), and collateral dominated by BTC and ETH derivatives.
- WETH operates at 83.3% utilization, close to its interest‑rate kink, making it a key transmission channel for ETH‑driven stress.
- cbXRP is effectively borrow‑constrained with ~100% borrow‑cap utilization, elevated rates, and extreme USDC borrowing concentration (92%).
- EURC and USDS are structurally tight stablecoin markets with utilization near 67% and 76%, respectively, and crypto‑heavy collateral bases.
- VIRTUAL, MORPHO, and wrsETH exhibit severe parameter misconfiguration, where caps no longer reflect economic reality, introducing governance and monitoring risk.
- WELL shows rising strategic importance, with ~82% supply‑cap utilization and ~70% borrow‑cap utilization, making it one of the first non‑stablecoin markets likely to require governance action if growth continues.
At the other end of the spectrum, cbBTC, LBTC, rETH, wstETH, weETH, and tBTC remain deeply liquid and lightly utilized, though many embed meaningful structural risk through self‑collateralization or ETH/BTC‑centric collateral loops.
Across the protocol, three system‑level themes dominate:
- Borrowing is increasingly concentrated into stablecoin markets (USDC, USDS, EURC, cbXRP), creating localized liquidity and rate sensitivity.
- Collateral is overwhelmingly crypto‑native, especially ETH and BTC derivatives, amplifying wrong‑way risk during market downturns.
- Governance configuration is diverging from actual usage in several markets, weakening the effectiveness of caps as risk controls.
Stablecoin Markets
USDC
USDC remains Moonwell’s most economically important market, with $36.22M supplied and $25.72M borrowed, translating to 71.01% utilization. Although supply‑cap usage is low (~18–19%) and borrow‑cap usage only ~14–15%, effective liquidity is constrained: just ~29% of supplied USDC (~$10.5M) remains withdrawable at any time.
Borrowing demand is structurally high and diversified, but still concentrated in major crypto assets: WETH (21.9%), cbBTC (19.2%), self‑borrowing (17.5%), AERO (15.3%), and cbXRP (10.5%). On the collateral side, risk is heavier: cbBTC alone represents 42.3%, followed by WETH (18.4%) and AERO (10.8%), meaning roughly two‑thirds of collateral value is tied to BTC and ETH derivatives.
Interest rates remained stable around 3.65% supply APY and 5.70% borrow APY, safely below the 90% utilization kink, but a brief spike near full utilization early in the month illustrates how quickly funding conditions could tighten.
USDS
USDS is small in absolute size ($9.8k supply) but extreme in structure. Utilization averaged near 80%, ending the month at 76.34%, leaving only ~23.7% liquidity buffer.
While caps are barely used (~1% utilization on both supply and borrow caps), the interest‑rate curve is steep: borrow APY briefly exceeded 60–90% when utilization touched the 90% kink, before normalizing to ~5.2%.
Borrowing is concentrated in USDC (62.3%) and cbBTC (22.0%), while collateral is dominated by cbBTC (43%) and cbETH (19%). This makes USDS more crypto‑sensitive than USDC despite being a stablecoin market.
EURC
EURC shows persistent high utilization at 67.35%, with only ~33% liquid buffer, despite minimal cap usage (<8% supply‑cap, <6% borrow‑cap utilization).
Borrowing is dominated by USDC (86.1%), tightly linking EUR liquidity to USD stablecoin cycles. Collateral is heavily crypto‑native: cbBTC (31.5%), WETH (22.3%), AERO (13.8%), and cbETH (8.9%), meaning over 75% of collateral value is volatile.
Rates fluctuated between ~2.5–4.5% supply APY and ~4.3–6.5% borrow APY, remaining below the 90% kink but with convex risk if utilization spikes.
DAI
DAI illustrates how low participation can generate fragility. Total supply is only $22.8k, with utilization at 54.05%, close to its 60% interest‑rate kink.
Despite low absolute volumes, borrow APY briefly exceeded 40% mid‑month. Supply APY remains 0% due to a 100% reserve factor, suppressing supplier incentives and keeping supply cap usage at just ~5.7%.
Borrowing is dominated by WETH (70%), while collateral is mostly USDC (53.6%), but with meaningful exposure to cbETH (18.5%) and cbXRP (11.7%).
USDbC
USDbC is economically small ($8.4k supply) and lightly utilized (12.34%), but severely misconfigured: reported supply‑cap utilization ~961% and borrow‑cap utilization ~4,061% render caps meaningless.
Borrowing is almost entirely USDC (96%), while collateral is almost entirely WETH (96.8%), creating single‑asset exposure to ETH price movements.
XRP-Based Market
cbXRP
cbXRP supplied stands at 3.11M ($5.91M) against 1.59M borrowed ($3.02M), resulting in 51.02% utilization. Supply-cap usage is moderate (~62%), but the borrow side is effectively saturated, with ~100% borrow-cap utilization for most of January.
Borrowing is highly concentrated in USDC (92.0%), with minor exposure to cbBTC (3.3%) and self-borrowing (3.9%). Collateral composition is similarly stablecoin-heavy: USDC (78.2%), cbXRP (11.5%), cbETH (4.8%), and cbBTC (3.3%).
Supply APY averaged ~4.9%, while borrow APY stabilized near 12.3%, after exceeding 20% during early-month utilization spikes. With utilization just below the 60% interest-rate kink, funding costs remain sensitive to small shifts in borrowing or liquidity.
ETH‑Derivative Markets
WETH
WETH is the most systemically important crypto‑native market on Moonwell, with $19.49M supplied, $16.23M borrowed, and 83.26% utilization. Only ~16.7% liquidity buffer remains.
Supply‑ and borrow‑cap utilization are low (~6.8% and ~8.4%), so constraints are liquidity‑based rather than governance‑based.
Borrowing is concentrated in USDC (48.9%), self‑borrowing (27.0%), and AERO (14.5%). Collateral is dominated by ETH derivatives: wstETH (52.4%), WETH (14.6%), cbETH (7.0%), rETH (4.0%), totaling ~78% ETH‑correlated collateral.
Borrow APY remained around 1.0–1.2%, but utilization is only ~7% below the 90% kink, meaning modest demand spikes could trigger steep rate increases.
wstETH, weETH, rETH
These markets share similar structures:
- wstETH: 3.79% utilization, >96% liquidity buffer, borrow‑side concentration 91.5% in WETH, collateral ~85% ETH‑based, reserves 0.17% of supply.
- weETH: 13.49% utilization, 86.5% liquidity buffer, collateral 92.5% wstETH, reserves 6.8% of supply.
- rETH: 2.58% utilization, 97% liquidity buffer, collateral ~92% ETH derivatives, reserves 0.36% of supply.
All are operationally safe today, but structurally exposed to ETH price and staking‑derivative risk, with partial self‑collateralization loops (e.g., rETH collateralized by rETH at 49.4%).
cbETH
cbETH sits at 21.21% utilization, with ~80% liquidity buffer, supply‑cap usage ~10%, and borrow‑cap usage ~34%.
Borrowing is split between WETH (45.9%) and USDC (42.9%), while collateral is diversified: USDC (48%), wstETH (21.2%), WETH (17.7%).
Bitcoin‑Based Markets
cbBTC
cbBTC is one of the lowest‑risk markets:
- Utilization: 14.06%
- Liquidity buffer: >85%
- Supply‑cap usage: ~20%
- Borrow‑cap usage: ~7%
Borrowing is heavily stablecoin‑driven (USDC 86.3%). Collateral, however, is crypto‑heavy: AERO (28.1%), USDC (21.8%), LBTC (13.1%), WETH (9.7%), VIRTUAL (9.9%), cbBTC (9.6%).
LBTC and tBTC
- LBTC: 11.54% utilization; collateral 90.6% LBTC self‑collateralization; borrow‑side dominated by cbBTC (37.4%) and WETH (33.1%); reserves 0.6% of supply.
- tBTC: 11.22% utilization; collateral 82.4% tBTC self‑collateralization; reserves 1.6% of supply.
Both are liquid and low‑stress but structurally exposed to wrong‑way risk during BTC price declines.
Governance & Ecosystem Tokens
WELL
WELL is one of the most strategically relevant non‑stablecoin markets:
- Utilization: 11.67%
- Supply‑cap utilization: ~82%
- Borrow‑cap utilization: ~70%
- Liquidity buffer: ~88%
Borrowing is overwhelmingly USDC‑driven (89.1%), while collateral is diversified: USDC (40.7%), cbBTC (35.3%), WETH (13.8%). Self‑collateralization is negligible (~0.1%).
AERO
AERO operates at 27.81% utilization, with ~72% liquidity buffer, supply‑cap usage ~28%, and borrow‑cap usage ~22%.
Borrowing is dominated by USDC (69.2%) and cbBTC (23.4%), while collateral is heavily ETH‑based: WETH (64.4%) and USDC (26.6%).
VIRTUAL
VIRTUAL shows:
- Utilization: 49.76%
- Supply‑cap utilization: ~89%
- Borrow‑cap utilization: >900%
Borrowing is concentrated in USDC (50%) and cbBTC (45.7%). Collateral is crypto‑heavy, with cbBTC (35.9%), USDC (23.3%), WETH (18.6%), wstETH (7.1%), and self‑collateralization (5.3%).
MORPHO and wrsETH
- MORPHO: supply‑cap utilization ~100%, borrow‑cap utilization >220%, utilization only 3.8%, reserves 0.25% of supply.
- wrsETH: utilization 0.03%, supply‑cap utilization >5,000%, reserves 1.47% of supply.
Both are financially low‑risk but operationally misconfigured.
Protocol‑Wide Summary
- Highest utilization markets: WETH (83%), USDS (76%), USDC (71%), EURC (67%), cbXRP (51%).
- Most cap‑constrained markets: cbXRP (borrow cap 100%), WELL (82% supply / 70% borrow), VIRTUAL and MORPHO (misconfigured).
- Highest self‑collateralization: LBTC (90.6%), tBTC (82.4%), rETH (49.4%).
Governance Considerations
The current market configuration highlights several structural characteristics that may be relevant for ongoing monitoring:
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In VIRTUAL, MORPHO, wrsETH, and USDbC, reported supply and borrow-cap utilization materially exceeds 100%, indicating that configured limits no longer reflect actual market size or usage patterns. As a result, caps in these markets no longer function as effective risk or growth controls.
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The cbXRP market is operating at approximately 100% borrow-cap utilization, while supply-cap usage is near 62%. Under the current configuration, this effectively constrains additional borrowing activity despite sustained demand.
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The WELL market shows elevated cap usage on both sides of the book (~82% supply-cap utilization and ~70% borrow-cap utilization). If current growth trends persist, these parameters may become binding in the medium term.
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Several high-utilization markets, particularly USDC, USDS, EURC, and MAMO, combine relatively thin liquidity buffers with modest reserve ratios. This configuration suggests that loss-absorption capacity remains limited relative to potential liquidation volumes during stress scenarios.
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Across ETH- and BTC-denominated markets, collateral remains heavily concentrated in correlated crypto-native assets. This structure is consistent with elevated liquidation clustering risk during sharp market drawdowns, especially in markets with partial or dominant self-collateralization (e.g., LBTC, tBTC, rETH).
These observations are based solely on current on-chain balances and protocol parameters and are intended to describe how existing configurations interact with observed usage patterns.
Appendix: Data Sources and Methodology
All figures are derived from Moonwell’s on-chain market data and protocol parameters, sourced primarily from the Anthias Labs Risk Dashboard and the community-maintained Moonwell Risk Dashboard on Dune, as of 28 January 2026. Utilization is calculated as total borrows divided by total supply, while cap utilization is measured against protocol-defined limits.
This report is intended for research and governance discussion purposes and does not constitute financial advice.