CirBTC borrowing on Morpho hits $190 million as USDC liquidity runs thin

Institutions apparently wanted to borrow against their Bitcoin without selling it. They wanted it badly enough to drain nearly every spare dollar from the pool built for the job.

About 97.4% of the USDC supplied to the main cirBTC/USDC market on Morpho is now borrowed. When Circle Mint opened access on Sept. 21, that figure was 8.1%. Three weeks later, the room is almost full.

From quiet launch to near capacity

As of Oct. 13, 2026, the flagship cirBTC/USDC market on Circle’s Arc Layer-1 held $195 million in supplied USDC. Of that, $190 million had been borrowed.

Circle launched cirBTC on Sept. 21 as a token backed 1:1 by Bitcoin. It is built for a product Circle calls Digital Asset-Backed Borrowing, or DABB.

Eligible institutional Circle Mint customers can post cirBTC as collateral. They can then borrow USDC that lands directly in their Mint balances. The lending runs through Morpho markets on both Arc and Ethereum.

Collateral is not the constraint. More than $304 million in cirBTC currently backs these borrowing operations. The bottleneck is the dollars on the other side of the table.

The squeeze is not limited to the headline market either. Smaller individual cirBTC/USDC markets on Arc have also reported utilization close to 100%.

Who does what in this arrangement

Circle has been careful to keep itself out of the lending business. It does not underwrite loans and does not lend in this structure.

Its role is custodial, handled through Circle National Trust. Proof of reserves is published onchain using Chainlink, so anyone can check that the Bitcoin behind cirBTC actually exists.

Morpho sets and manages the market parameters. That includes a liquidation loan-to-value ratio, or LLTV, of 86%.

Borrowing costs have stayed modest. Variable rates in the market sit at roughly 2.8% to 2.9% APY, with the current borrow rate near 2.89%.

Circle also widened the menu in early October. An integration with Aave gave institutional clients a second venue for borrowing against cirBTC.

Why the 8.1% to 97.4% jump matters

Utilization measures how much of a lending pool is actually out the door. The move from 8.1% to 97.4% in about three weeks tells you demand ran far ahead of supply. Borrowers showed up faster than lenders did.

For borrowers, the product works, the rate is cheap, and the plumbing into Circle Mint seems to function as advertised. But with roughly $5 million of headroom in the main market, the next large borrower may find the cupboard nearly bare.

What this means for institutional Bitcoin and DeFi

These are institutional Circle Mint clients, not anonymous wallets. They are tapping a DeFi protocol to do it.

Circle stays a custodian and stablecoin issuer. Morpho runs the risk engine. Chainlink verifies the reserves.

For Circle, the product gives Bitcoin holders a reason to bring assets into its ecosystem and creates fresh demand for USDC itself. Every dollar borrowed in these markets is a dollar of USDC in circulation.

It also gives Arc, Circle’s own Layer-1, a concrete use case early in its life. The main market and the smaller near-full markets are all on Arc.

The risks are the usual ones, magnified by concentration. An 86% LLTV leaves room, but a sharp Bitcoin drawdown could push some positions toward liquidation. In a market where almost all the cash is already lent out, liquidations and withdrawals arriving together would stress the system in ways a half-empty pool would not feel.