What Will the Growth of Lending Protocol TVL Lead To? Since the start of the year: - Aave TVL is up 2x: from $34B to $69B - Morpho TVL is up 2x: from $5B to $10B - Kamino TVL is up 1.7×: from $3B to $5B And I believe this is only the beginning. Lending markets are the foundation that drives DeFi expansion. If you recall the 2021 bull market, it all kicked off with DeFi Summer - which itself started with lending protocol growth: first Compound, then Aave, then MakerDAO. Why does this happen? In crypto, the primary function of lending protocols isn’t generating interest income - it’s enabling leverage. - Asset price increases boost collateral value - Higher collateral reduces LTV ratios - Lower LTV means you can borrow more and reinvest - Traders borrow stablecoins to buy more assets, driving up demand for stablecoin loans This cycle fuels rising interest rates for stablecoin borrowing. Historically, this was especially important when derivative markets were immature. Today, we have robust infrastructure - fast PerpDEXs, Pendle derivatives, onchain/offchain basis trading, and more. Does this mean lending protocols are less important now? - Absolutely not. 1. ETH’s x3 growth has unlocked an extra ~$380B in idle assets 2. Roughly 30% (~$140B) of this liquidity could start circulating in Web3 3. Stablecoin loan rates will rise first, funding LP positions and PerpDEX trading, with the rest flowing into DEXs and other DeFi protocols 4. This will push up ETH and BTC deposit rates 5. DAT companies - especially ETH-focused - will increasingly deposit ETH into lending protocols, expanding collateral; BTC-based DAT may follow later 6. Extra ETH liquidity could ignite a broad altseason as capital moves across chains in search of yield 7. This boosts native lending protocol TVL across various networks, further recycling liquidity back onchain 8. Eventually, overleverage will trigger a correction or collapse I believe we’re now at the start of stage 3. If Ethereum holds above $4,000 for an extended period, this cycle could run for months. The key is tracking liquidity flows to know which stage we’re in. We’re on the edge of an altseason. If it materializes, lending protocols will be the biggest winners - surpassing even the PerpDEX market. Because lending is, and will remain, the foundation of DeFi. ====================================== If you liked the research, plz like/retweet and follow to @Eugene_Bulltime And follow on strong visioners and analysts: @0xBreadguy @poopmandefi @TheDeFISaint @DoggfatherCrew @0xSalazar @DefiIgnas @Defi_Warhol @Moomsxxx @hmalviya9 @Mars_DeFi @rektdiomedes @eli5_defi @JayLovesPotato @Steve_4P @TheDeFinvestor @0xCheeezzyyyy @arndxt_xo @alpha_pls