The first quarter of 2025 tells a clear story about the evolution of Defi. Although yields on the main loan platforms are considerably compressed, innovation on the edges of the market demonstrates maturation and continuous growth of defi.
Large yield compression
DEFI yields have decreased sharply on all the main loan platforms:
- The Vault.Fyi USD Benchmark dropped below 3.1%, below the American yield of the hiding place in T 1 month of ~ 4.3% for the first time since the end of 2023. This reference, an average weighted on four main markets, approached 14% at the end of 2024.
- Spark implemented four consecutive rate drops in 2025 only. From the year to 12.5%, rates were reduced to 8.75%, then 6.5%, and are now at 4.5%.
- The yields at the Aave on Mainnet stable are around 3% for the USDC and the USDT, levels which would have been considered disappointing just a few months ago.
This compression signals a market which is considerably cooled from the exuberance of the end of 2024, with the demand of the moderate borrower on the main platforms.
TVL paradox: growth despite lower yields
Despite the drop in yields, the main vaults of Stablecoin have experienced extraordinary growth:
- Collectively, the largest chests on Aave, Sky, Ethena and Compound have almost quadrupled in size in the past 12 months, from around $ 4 billion to around $ 15 billion in supply.
- Despite the consecutive rate of consecutive rate of Spark, TVL increased by more than 3x from the beginning of 2025.
As yields increased from almost 15% to less than 5%, capital remained sticky. This apparently contradictory behavior reflects the increase in institutional comfort with deffi protocols as legitimate financial infrastructure rather than speculative vehicles.
The rise of the Conservatives: the new DEFI asset managers
The emergence of conservation represents a significant change in the DEFI loans. Protocols like Morpho and Euler have introduced preservatives who build, manage and optimize loan chests.
These preservatives serve as a new breed of DEFI asset managers, assessing markets, establishing risk parameters and optimization of capital allowances to provide improved yields. Unlike traditional service providers who simply advise protocols, conservatives actively manage the strategies for deploying capital through various loan possibilities.
On platforms like Morpho and Euler, the Conservatives manage risk management functions: selecting assets can serve as a guarantee, establish appropriate loan / value ratios, the choice of Oracle price flows and the implementation of supply ceilings. They essentially build targeted loan strategies optimized for specific risk profiles, seated between passive lenders and sources of performance.
Companies like Gauntlet, service providers previously protocols like Aave or Compound, now manage nearly $ 750 million on TVL on several protocols. With performance costs ranging from 0 to 15%, this potentially represents millions of annual income with much more upwards than traditional service agreements. According to a morpho dashboard, the commissioners generated nearly 3 million income and on the basis of the first quarter income are on the right track to make 7.8 mm in 2025.
The most successful conservative strategies have maintained higher yields mainly by accepting collaterals to be higher in more aggressive LTV ratios, pulling in particular the LP pendle tokens. This approach requires sophisticated risk management but offers higher yields in the current compressed environment.
As concrete examples, yields on the largest USDC chests on Morpho and Euler have surpassed the chests.
Protocol stratification: a layer market
The compressed environment has created a separate market structure:
1. First -order infrastructure (Aave, Compound, Heaven)
- Function similar to traditional monetary market funds
- Offer modest yields (2.4-6.5%) with maximum safety and liquidity
- Captured the share of the Lion of TVL growth
2. Optimizing infrastructure and strategy providers
- Basic layer optimizing: Platforms like Morpho and Euler provide a modular infrastructure allowing greater capital efficiency
- Strategies suppliers: Specialized companies like Mev Capital, Smokehouse and Gauntlet rely on these platforms to provide higher yields more than 12% on USDC and USDT (end of March)
This relationship with two levels creates a more dynamic market where strategy providers can quickly iterate on performance opportunities without building basic infrastructure. The yields available to users depend on both the effectiveness of the basic protocol and the sophistication of the strategies deployed at the top.
This restructured market means that users are now sailing in a more complex landscape where the relationship between protocols and strategies determines the yield potential. While blue chip protocols offer simplicity and safety, the combination of optimization of protocols and specialized strategies provides comparable yields to what existed on platforms like Aave or Compound in higher rate environments.
Chain by chain: where yields now live
Despite the proliferation of alternative L2 and L1s, Ethereum Mainnet continues to accommodate many highest yield opportunities, both inclusive and exclusive of tokens incentives. This persistence of Ethereum’s yield advantage is notable on a market where incentive programs have often moved the return capital to new channels.
Among the mature channels (Ethereum, Arbitrum, Base, Polygone, Optimism), yields remain depressed at all levels. Apart from Mainnet, most attractive performance opportunities are focused on the basis, suggesting its emerging role as a secondary performance center.
More recent channels with substantial incitement programs (such as Berachain and Sonic) show high yields, but the sustainability of these rates remains questionable, because the incentives end up shrinking.
MULLET DEFI: Fintech at the front, defined at the rear
Significant development of this quarter was the introduction by coquer of bitcoin collateralized loans powered by Morpho on its basic network. This integration represents the emerging “DEFI MULLET” thesis – Endthmance interfaces at the front, infrastructure defined at the rear.
As manager of Coinbase consumer products, Max Branzburg noted: “It is a time when we plant a flag that Coinbase comes to the head, and we bring millions of users with their billions of dollars.” Integration provides Morpho loan capacities directly in the Coinbase user interface, allowing users to borrow up to $ 100,000 in USDC against their Bitcoin holdings.
This approach embodies the opinion that billions will eventually use Ethereum and Defi protocols without knowing it – just as they use TCP / IP today without conscience. Traditional Fintech companies will increasingly adopt this strategy, keeping familiar interfaces while taking advantage of the infrastructure of Defi.
The implementation of the Coinbase is particularly remarkable for its complete integration into the Coinbase ecosystem: users publish a BTC warranty to mentor CBBTC (Bitcoin wrapped in Coinbase on the basis) and borrow USDC (Coinbase Stablecoin) on the Finbase linen network).
While waiting: catalysts of the loans market
Several factors could reshape the landscape of loans until 2025:
- Democratic curation: As the conservative models ripen, could AI crypto agents ultimately allow everyone to become their own curator? Although even earlier, the progress of automation on the channel suggest a future where optimization of personalized risk yield becomes more accessible to retail users.
- Rwa integration: The continuous evolution of the integration of active active people could introduce new sources of yield less correlated with the cycles of the cryptography market.
- Institutional adoption: Institutional comfort on a scale with DEFI infrastructure suggests increasing capital flows that could change loans dynamics.
- Specialized loan niches: The emergence of highly specialized loan markets targeting the specific needs of users beyond the simple generation of elements.
The best -placed protocols to prosper will be those that can operate effectively through the risk spectrum, serving both conservative institutional capital and more aggressive performance applicants, thanks to increasingly sophisticated and capital optimization management strategies.
