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DeFi loans surge to record highs amid yield chase

Aave's V3 protocol approaches $6 billion in loans as DeFi strategies mature.

Golden DeFi loan growth icon on teal gradient.

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The search for innovative yield strategies in the decentralized finance (DeFi) ecosystem sent the on-chain borrow excess to $11 billion, according to IntoTheBlock’s “On-chain Insights” newsletter. This represents a two-year peak, which was propelled by Ether.fi and Ethena.

Ether.fi’s eETH and Ethena’s USDe have soared to $6.4 billion and $3.2 billion in supply, respectively. Ether.fi’s eETH, integral to the EigenLayer ecosystem, now totals 1.7 million tokens. Meanwhile, Ethena’s USDe has climbed to become the fourth-largest stablecoin.

Image: IntoTheBlock

DeFi protocols have issued over $11 billion in loans, marking a two-year high. Aave’s V3 protocol is nearing a borrowed funds milestone of $6 billion, leading the sector. High-risk loans have also peaked at $1 billion, indicating users’ increased market exposure.

Notably, over $1 billion of weETH is being used as collateral in Aave’s V3 protocol for ETH borrowing. The adoption of weETH as collateral has surged since its April inclusion.

Image: IntoTheBlock

The DeFi landscape is witnessing sophisticated strategies for maximizing yields, such as leveraging liquid staking and restaking tokens, and optimizing stablecoin use.

“These practices not only demonstrate the depth of the current market’s capabilities but also suggest a maturing understanding of leverage and reward dynamics within the DeFi ecosystem,” concludes the newsletter.

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