Debt Analysis

Key Insights

• Aave’s TVL nearly doubled to around $10 billion in 2023, and increased debt issued from $1.8 billion to $3.3 billion.
• Maker DAO made over $215 million in profits this year, the highest of any crypto protocol.
• The confluence of significant capital inflows from high-tier borrowers, an overall increase in borrow volume, and the sector’s proven resilience positions Aave and debt markets broadly for increased usage in 2024.

In 2023, prices and lending behavior largely correlated with U.S. treasury rates. Risk-free T bills reached 5.5%, greatly diminishing the attraction for onchain yields. When treasury rates initially surged, protocols like Tether and Maker adeptly utilized their stablecoin reserves to tap into the rising offchain risk-free rates.