Stay cautious in leverage strategies. We've observed a significant uptick in the DeFi funding benchmark, spiking from 2.34% to 5.73% between October 17th and October 27th. This rapid movement in funding costs is a critical signal. Key Insight: Historically, variable borrow rates across major protocols tend to follow the trend set by the funding benchmark. DeFi users must recalibrate their risk models for a potential surge in borrowing costs.

Granular pools analysis reveals pockets of high volatility and potential mean reversion risk. Focus: Stablecoin borrowing. We look for pools where the current 7-day average rate is dramatically lower than its historical average. Example: USDC on @sparkdotfi. - current 7d Avg Borrow Rate: 4.25% - Aug 1st 7d Avg Borrow Rate: 11.99% This ~800 basis point drop suggests a strong possibility of rate correction back toward a higher, longer-term average

We contrast 7-day (current market) vs. 90-day (long-term average) borrow rates for top USDT pools to isolate protocols with the highest risk profile for a rate hike.

The pools on @MorphoLabs (WBTC/USDT, wstETH/USDT) stand out. Their current low rates are significantly underpriced relative to their 3-month average. For Borrowers: These pools offer the greatest current value but carry the highest probability of a rate increase to return to the long-term equilibrium. Liquidation thresholds must be managed diligently.

In contrast, protocols like @aave Core and @compoundfinance show a more stable borrowing rate, with the 7d and 90d averages closely aligned. This suggests less susceptibility to wild swings and a more predictable cost basis for long-term strategies.