As we welcomed the holiday season, loans were extended into the new year to give our users a well-deserved break. Auctions are set to resume the week of January 6. For those eager to lock in fixed rates during the holiday period, visit our Blue Sheets Simple Earn page to explore current opportunities (Not available to U.S. persons).
The past year marked significant milestones for Term Finance. Our cumulative borrow volume exceeded $220M by year-end, and our TVL (Total Value Locked) surged from approximately $20M in December 2023 to an impressive $60-$70M by December 2024. These achievements firmly established TERM as the first scalable fixed-rate lending protocol on-chain.
Additionally, Term successfully closed a $5.5M extension round led by Electric Capital, with participation from a16z CSX, Blizzard Fund, and other notable investors. This funding provides us with the resources to continue building and scaling the Term Finance ecosystem over the coming years.
As we step into 2025, we remain committed to our mission of creating a robust and efficient fixed-rate lending platform for the DeFi ecosystem. We are excited to bring new opportunities, innovations, and growth to our community.
Thank you for being a vital part of our journey. Here's to another year of growth and success together!
In derivatives markets, funding rates continued its decline, with 3-month basis falling -70bps to 12.69% and perpetual funding rates declining by -264bps to 11.39% on a 30-day trailing basis.
Consistent with this decline, DeFi rates are beginning to pick up on a relative basis, coming off cycle lows at a rapid pace and closing the week at 95% passthrough relative to derivatives rates.
Given this week’s move, perpetual funding rates are now trading below 3-month basis, suggesting that perpetual funding rates are expected to bounce back in the near to medium term.
Turning to DeFi variable rate markets, floating rates are turning over, closing down -87bps on the week to 13.03% on a 30-day trailing basis. Over a shorter lookback period (just seven days), Aave rates averaged 12.35% on the week, foreshadowing lower rates ahead.
Diving in the microstructure of Aave USDC markets, utilization has declined rapidly over the past week. This decline, however, is driven by increased supply rather than lower demand. Overall top line demand closes the week roughly unchanged vs. the week prior.
Consistent with declining utilization, intraday volatility driven by excess demand at the kink remains non-existent.
With rates stabilizing around at much higher levels and utilization on the decline, borrow/lend spreads on Aave for USDC are beginning to rise. Expects spreads to widen further absent a pickup in demand to match recent increases in supply.
Keep an eye on markets in the next week or two. In just the first two days of trading, crypto assets have seen a large bounceback with BTC closing back up near $98k. Whenever the market decides it’s time for the next leg up, DeFi rates will surely follow.
Turning now to ETH markets, ETH rates reversed to the downside, with borrow rates declining -4bps to 2.93% on a 30-day trailing basis. This decline is consistent with the CESR index, which closes the week down -2bps to 3.13% on a 30-day trailing basis.
The effect of the large (~130K ETH) deposit on Christmas Eve last week is filtering through to realized borrow rates, knocking down utilization from just under 90% —> 85%.
Intraday charts are consistent with this dynamic, showing that ETH rates remained stable throughout the week.
With the wstETH looping arbitrage spread narrowing to just ~20bps—the narrowest level since we began tracking—ETH borrow demand is expected to taper in the medium term as this arbitrage opportunity diminishes.
We are just a few days into the new year and market action suggests profit taking and de-risking ahead of year-end. The medium term outlook remains bullish. Take advantage of lower rates while they last, they will surely heat up again if the market makes another run toward new highs as expected.
