DeFi Loan Volume Climbs to Highest Since August 2022

Decentralized finance protocols are enabling the highest number of loans in 15 months.

Total outstanding borrows on the top seven DeFi lending platforms has swelled to $6 billion as of Nov. 30, clocking the highest level this year, and the highest since August 2022, according to the latest DeFi sector brief by Messari.

Aave leads the way, with $3 billion, a 9.6% jump in the past thirty days, followed from afar by Compound Finance, which sits at $887 million worth of debt, showcasing virtually no monthly variation.

Investors’ risk appetite is returning as Bitcoin and Ethereum reach yearly highs. Traders use crypto they own as collateral to borrow additional crypto in order to maximize their returns, with some using that borrowed capital to deploy in other DeFi protocols.

Excitement Builds Up

There are two main factors influencing additional debt taken on by investors, says Kunal Goel, senior research analyst for Messari.

“Higher token prices and higher market cap means more can be borrowed (in USD) against the same assets,” he told The Defiant. Goel explained that as prices increase, and “excitement for the bull market builds up,” this has translated into more demand for leverage.

Most DeFi lending is against collateral, paying an interest rate that can vary between 2-5%.

On Aave, borrowing USDC requires investors to pay 5.02% APR, whereas users lending are being paid 3.96%. On Compound Finance lenders receive 6.59% on their stablecoins, and borrowers pay out 4.36%.

Tarot and Spark Lead

Of the seven top lending platforms, Tarot had the largest monthly increase, with $159 million worth of loans issued, a 1,164% jump.

It is followed by Spark, a protocol that saw its TVL balloon to $1 billion in mid-November and has more than doubled its debt over the past thirty days at $624 million.

Borrowing activity on Spark could be fuelled by airdrop farming, wrote Messari. Investors may also be borrowing DAI to deposit the stablecoin into Blast.

This is likely due to the forthcoming layer 2 network’s stablecoin interest opportunities provided by MakerDAO which have caused its TVL to balloon to $741 million–a $110 million increase since December began.

TVL on the top ten lending protocols reach $19 billion, according to DefiLlama, that’s 38% of the entire DeFi market, which finds itself at $50.83 billion.

Coingecko reports that market caps for tokens belonging to borrowing and lending protocols nears $4.5 billion, a 6% of the total market cap for DeFi, and 0.2% of the entire crypto market, which has jumped 4.3% in the past twenty four hours, settling at $1.676 trillion.