Morpho Protocol Sees Negative Borrow Rates in DeFi Lending Markets
Written by Ohris M. Greyoon, Blockchain & Crypto Expert
Source: Coinmarketcap
Updated: Jan 07 2026- Negative Rate Phenomenon: Morpho protocol's Katana chain offered borrowers negative rates of 1.5% on vbETH and 1.15% on vbWBTC in early January, indicating a shift in decentralized finance lending economics that could attract more borrowers into the market.
- Liquidity Changes: Kamino's USDC Prime vault saw its supply APY plummet from 6.5% to below 4% on December 31 as approximately $75 million in leverage unwound, reflecting a sharp decline in market demand for liquidity during year-end deleveraging.
- Cross-Chain Rate Discrepancies: Borrowing costs on Ethereum mainnet were significantly higher than on alternative chains, highlighting liquidity fragmentation, while Katana's borrowing market remains incentivized through KAT token rewards, which currently lack tradability and may affect long-term attractiveness.
- Year-End Rebalancing Impact: Utilization in Kamino's USDC Prime vault fell roughly 13% within hours as positions were closed ahead of the tax calendar reset, demonstrating how tax optimization strategies can lead to temporary fluctuations in borrowing costs during transitional periods.
About the author
Ohris M. Greyoon
Ohris M. Greyoon holds a Master’s in Computer Science from MIT and has 10 years of experience in blockchain technology and cryptocurrency markets. A pioneer in decentralized finance (DeFi) analysis, he leads Intellectia’s Crypto News, offering cutting-edge insights into digital assets.
