Monthly Risk Report (Optimism)
January 2026
Prepared as an independent, market-by-market risk assessment based on on-chain data as of 30 January 2026.
Executive Summary
This assessment provides a market-level view of Moonwell’s risk posture on Optimism as of late January 2026, based on observed utilization, effective liquidity, collateral composition, interest-rate behavior, and protocol configuration across the Optimism deployment.
Three structural realities define the current risk profile:
- Stablecoin markets (DAI, USDC, USDT, USDT0) are the primary stress carriers, exhibiting elevated utilization, thin effective liquidity buffers, and high rate sensitivity.
- WETH is the dominant systemic transmission channel, linking stablecoin demand, ETH-derivative collateral, and ecosystem-token exposure.
- Several peripheral markets (weETH, WBTC, USDT0) are economically small but exhibit governance or configuration-driven risk, where caps or parameters no longer reflect actual usage.
While most ETH-derivative markets (wstETH, rETH, weETH) remain low-stress today, they collectively embed strong ETH correlation and partial self-collateralization loops, which could amplify liquidation clustering under adverse price movements.
Systemic Market Groupings
1. Stablecoin Markets
DAI
DAI is the most utilization-stressed stablecoin market on Optimism. With ~89% utilization, effective liquidity buffers are extremely thin (~11%), leaving the market vulnerable to even modest withdrawals or borrow increases.
Despite this tightness, caps are not binding. The constraint is purely economic, not governance-driven. The interest-rate model exacerbates fragility: with a 90% kink and steep jump multiplier, DAI remains highly sensitive to marginal utilization changes. This was evident earlier in January, when utilization briefly approached 100% and borrow rates spiked above 100% APY.
Structurally, DAI is almost entirely self-referential. Over 96% of borrowing and ~99.6% of collateral is DAI itself. This minimizes cross-asset exposure but introduces recursive liquidity risk, where stress propagates internally rather than through diversification.
USDC
USDC is the largest and most systemically important market on Optimism. Utilization sits near 63%, leaving a still-meaningful but shrinking liquidity buffer (~37%).
Borrow demand is diversified but ecosystem-linked, with OP and VELO together accounting for over 60% of borrows. This ties USDC liquidity directly to governance- and incentive-token cycles, rather than purely defensive stablecoin demand.
Collateral composition introduces structural risk: VELO dominates posted collateral (~69%), with additional exposure to ETH derivatives. As a result, liquidation outcomes depend heavily on secondary-market liquidity rather than on stable collateral buffers.
USDT & USDT0
USDT and USDT0 both operate at elevated utilization (81–88%), with thin liquidity buffers and persistent rate pressure.
- **USDT is primarily a funding source for stablecoin-denominated strategies, with USDT itself representing over 98% of outstanding borrows.
- USDT0, while much smaller, frequently operates near or above its interest-rate kink, resulting in very high APYs (18–22%) despite modest absolute balances.
Collateral in both markets is heavily crypto-native (WETH, OP, VELO), amplifying downside sensitivity during volatility.
2. ETH & ETH-Derivative Markets
WETH – Systemic Core Market
WETH is the primary risk transmission channel on Optimism. With ~71% utilization, it operates materially tighter than ETH-derivative peers and links stablecoin borrowing directly to ETH-correlated collateral.
Borrow demand is stablecoin-heavy (USDC and USDT0 ~80%), while collateral is dominated by ETH derivatives (wstETH, weETH, rETH) and VELO. This creates a one-directional risk loop: stablecoin stress feeds into ETH collateral liquidations, which in turn feed back into liquidity pressure.
Although still below the 90% kink, WETH sits close enough that incremental stress could rapidly steepen rates.
wstETH, rETH, weETH
These markets are operationally safe today:
- wstETH: ~4% utilization, near-total self-collateralization
- rETH: ~13% utilization, stablecoin-leaning borrow demand
- weETH: ~2.5% utilization, but constrained by a misaligned supply cap configuration**
Despite ample liquidity, all three share common traits:
- Strong ETH price correlation
- Partial or dominant self-collateralization
- Minimal rate sensitivity under current conditions
3. Governance & Ecosystem Tokens
OP
OP remains lightly utilized (~20%) and unconstrained by caps. Borrowing is overwhelmingly stablecoin-driven, positioning OP as a liquidity bridge rather than a speculative leverage asset.
Collateral composition introduces moderate ecosystem risk (VELO ~30%), but overall utilization and rates remain subdued.
VELO
VELO exhibits very low utilization (~5%) with abundant liquidity and muted rate dynamics. Borrowing is diversified across stablecoins and ETH-native assets, while collateral is more balanced than in most governance-token markets.
4. Dormant / Configuration-Driven Markets
WBTC
WBTC is functionally dormant. Extremely small balances, conservative parameters (0.1% collateral factor, 100% reserve factor), and near-zero activity render it systemically irrelevant in its current form.
Protocol-Wide Risk Synthesis
- Highest utilization markets: DAI, USDT0, USDT, WETH
- Most systemically important: USDC and WETH
- Most rate-sensitive: DAI and USDT0
- Strongest liquidity buffers: wstETH, rETH, VELO
- Governance-constrained markets: weETH
- Highest self-collateralization: DAI, wstETH
Governance Considerations
Several configuration dynamics merit monitoring:
- DAI’s proximity to its kink makes it structurally fragile despite modest size.
- USDT0’s high utilization and extreme rates may justify parameter reassessment despite small balances.
- WETH’s centrality suggests it should remain the primary focus of liquidity and reserve calibration.
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 30 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.