Term cleared another ~3.9M in volume this week, consistent with the week prior. Volumes were primarily driven by ETH loans with consistent demand against ETH+ collateral. Overall rates remain steady on Term.

For those eager to lock in fixed rates and hedge against further declines in lending rates, visit our Blue Sheets Simple Earn page to explore current opportunities (Not available to U.S. persons).

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Variable Rate Markets

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Basis and Perpetuals Markets

In derivatives markets, funding rates have been staging a sustained comeback. On a 30-day trailing basis, 3-month basis rose by +58bps to 4.91% and perpetual funding rates rose to 3.46%, up +119bps from the week prior.

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DeFi rates held steady on the week, narrowing the spread between DeFi and derivatives rates by a significant amount.

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With BTC breaking holding steady above 100k in a narrow range and perpetual funding rates normalizing, expect funding rates to pick up as the market re-leverage their portfolios.

USDC Markets

Turning to DeFi variable rate markets, the 30-day trailing average rose +7bps on the week to 4.53. Over a shorter lookback period (just seven days),  Aave borrow rates averaged 4.91% on the week, suggesting further gains ahead.

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Diving into the microstructure of Aave's USDC markets, utilization has continued to rise as predicted last week, closing near 80%—in line with the sustained increase in perpetual funding rates.

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Expect utilization to continue to tick up should BTC hold above the 100k range next week.

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And with utilization on the rise, supply/borrow spreads should continue to decline.

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Looking forward, it would not be surprising to see USDC rates nearing the kink in a couple weeks time. Lock in rates while you can.

ETH Markets

Turning now to ETH markets, ETH rates continue to decline, falling by -10bp on the week to 2.61% on a 30-day trailing basis. The CESR staking index, on the other hand, held steady at 3.01%, widening the spread by +10bp on a 30-day trailing basis.

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Market internals show that demand (-28k ETH) fell more rapidly than supply (-23k ETH) week on week, but overall market dynamics remain balanced.

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And intraday and intraweek volatility remained low with no kink driven spikes throughout the past week.

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Overall, ETH rates continue to decline back towards historical averages of around ~2.5%.

Looking forward

Markets were calm this past week, supported by positive, business-friendly U.S. trade diplomacy developments out of Saudi Arabia. Volatility remained subdued, and prices held steady—an environment conducive to leveraged trading. Expect calm and quiet markets to lead to increased use of leverage and higher rates in the near term.

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