Receive Industry Insights

January 19, 2024

Weekly Market Recap: January 19, 2024

Over 1.5mm USDC cleared this week at Term, with rates holding steady relative to previous auctions. ETH lending rates, on the other hand, dropped significantly down to 2.1% consistent with Aave V3, which saw utilization drop to 64% on account of large ETH supply inflows in recent weeks. With various restaking narratives picking up steam, wstETH collateral is beginning to flow into other opportunities, further reducing demand to borrow (even at slightly wider spreads). Speaking of restaking, Term is holding its first auction backed by’s liquid restaking token (LRT) - weETH. With various estimates pricing eigenlayer points at the equivalent of ~10-20% APY, this promises to be an interesting auction.  

Variable Rate Markets

USDC Markets

In the variable rate markets, USDC rates are finally taking a breather falling by -19bps from  8.90% to 8.71% on a 30-day trailing basis from two weeks ago and relatively flat over the past week. It is interesting to observe that the timing of this deceleration in rates seems to coincide with the launch of the BTC ETF on January 11.

Despite this pause in rates, volatility in variable rate USDC markets continue to remain elevated across the board. Intraday highs in the borrow rate spiked above 20% on two occasions in the past week.

ETH Markets

ETH borrow rates on Aave V3 fell -12bps on the week to 2.50% on a 30-day trailing basis, consistent with the CESR Staking Index that continues to decline. The CESR  Staking Index finishes the week down -17bps to 3.79% vs 3.96% the week prior.

Because staking yields are falling at a similar pace as the decline in ETH borrow rates, the potential arbitrage profits that can be earned has not improved with declining borrow rates. It is therefore unsurprising that recent new supply into Aave has remained unutilized over the past few weeks.

Looking forward, expect USDC rates to trend up again as the market moves closer to the Bitcoin halvening in April. In the ETH market, expect rates to continue to decline unless network fees start to pick up again. Perhaps some volatility around the halvening would be a trigger to increased on-chain trading activity.

This communication is strictly confidential and is intended exclusively for the use of the person to whom it was delivered by Terminal 0, Ltd. ("Term"). It may not be reproduced or re-transmitted in whole or in part without authorization. The contents of this communication and any attachments are solely for information purposes and are for your internal use only. Nothing contained herein constitutes an offer, solicitation, or recommendation to sell, or an offer to buy any securities, investment products, or investment advisory services.
This document may contain forward-looking statements and projections that are based on Term's current beliefs and assumptions and on information currently available that Term believes to be reasonable. However, such statements necessarily involve risks, uncertainties, and assumptions, and recipients may not put undue reliance on any of these statements.

Although the information provided herein has been obtained from sources which Term believes to be reliable, Term does not guarantee its accuracy, and such information may be incomplete or condensed. The information is subject to change without notice. Since Term furnishes all information as part of a general information service and without regard to a recipient's particular circumstances, Term shall not be liable for any damages arising out of any inaccuracy in the information.

The information in this presentation is not intended to provide, and should not be relied upon for, accounting, legal, or tax advice, or investment recommendations. Each recipient should consult their own tax, legal, accounting, financial, or other advisors.
The front-end interface for the Term Protocol located at is not available to U.S. persons as well as persons located in certain other jurisdictions. Please see the Terms of Use.