AAVE USDC interest rates decoupling from Compound and dYdX

AAVE USDC interest rates decoupling from Compound and dYdX

By DefiMoon | DeFiMoon | 2 May 2020


So far this year interest rates on USDC have moved in lockstep between major decentralized finance protocols dYdX and Compound. This correlation exist largely because both protocols share a lot of the same users, who move funds between protocols to get the best interest rate.

However, AAVE's USDC interest rates have not been very correlated with dYdX and Compound, and in April, AAVE's interest rate curve completely decoupled.



AAVE now offers the best interest rate for USDC deposits.

So where is all this demand for USDC coming from?

In a nutshell: the altcoin community!

Compound (34.65M) and dYdX (8.9M) have a much larger pool of USDC deposits than AAVE's 4.13M, but the demand from borrowers isn't there as the number of assets available for collateral is much more limited on Compound, even more so on dYdX.

AAVE not only supports many popular altcoins (LINK, KNC, TUSD, MKR) that Compound and dYdX haven't bothered with, it was also quick to support newer stablecoins such as Binance's BUSD and sUSD, a stablecoin issued by derivatives marketplace Synthetix.

To really see the difference in demand, all you have to do is look at the percentage of USDC supplied vs borrowed.

Compound: Supplied: $34.65M Borrowed: $5.73M

dYdX: Supplied: $8.9M Borrowed: $3.2M

AAVE: Supplied: $4.13M Borrowed: $3.367M

It should be noted that each protocol has its own unique interest rate model and that does affect supply/lend rate curves, but I think in this case the big differentiating factor in demand is simply more choice for collateral.



The other strategic decision that AAVE made early on, which is now paying off handsomely, is to support USDT at launch. As a result, the largest pool of USDT in DeFi now resides at AAVE. Compound just yesterday added Tether and is now hoping to catch up by adding WBTC. Maker also added WBTC today as a collateral option to mint DAI.

The moral of the story: DeFi protocols, don't ignore the altcoin community!


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The DeFiMoon blog is about news and developments concerning decentralized finance (DeFi) protocols (Compound, Maker, AAVE, DDEX, dYdX) and stablecoins (USDC, DAI, USDT, TUSD, PAX).

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