Recently, the hottest topic in the DeFi space has been the intense competition in the lending sector, and in this war without gunpowder, a protocol called Morpho is quietly rewriting the rules of the game. While everyone is still on edge about various stablecoin de-pegging events, Morpho is experiencing growth against the trend, with its TVL skyrocketing from several billion dollars at the beginning of the year to now $7.32 billion, making it the second-largest lending protocol after Aave.
Speaking of Morpho, many people may not be very familiar with this name, but if you are a Coinbase user, you may have unknowingly used its services. In October this year, the Ethereum Foundation directly invested $21 million into the Morpho protocol for yield generation, a move that is significant. It is well known that the Ethereum Foundation is notoriously cautious, and their choice of Morpho over other established protocols raises questions.
From a technical perspective, Morpho's innovation lies in the fact that it is not a simple fund pool model but optimizes the efficiency of traditional lending protocols through P2P matching. Simply put, when you borrow or lend on Aave or Compound, Morpho will try to directly match borrowers and lenders, bypassing the intermediaries of the fund pool, allowing lenders to earn higher returns (up to 20% higher) and borrowers to pay lower interest rates (up to 15% lower). This model is especially attractive in the current environment where DeFi yields are generally declining.
Let's look at the specific data. As of November 8, the price of the MORPHO token was $1.77, with a market capitalization of $942 million and a circulating supply of 236 million tokens, accounting for 23.6% of the total supply. The 24-hour trading volume reached $38.7 million, which is quite considerable. More importantly, the protocol's 30-day fee income reached $25.69 million, with an annualized fee income of $313 million, which is already more than six times that of Compound.
Of course, Morpho's rise has not been smooth sailing. The recent xUSD de-pegging event has sounded the alarm for the entire DeFi ecosystem, and Morpho has also been somewhat affected. During November 4-6, the collapse of Stream Finance led to a 77% plunge in xUSD, resulting in liquidity tension in some of Morpho's vaults. However, it is worth noting that due to Morpho's risk isolation design, only 3-4 vaults were affected, while the remaining 319 vaults operated normally, fully demonstrating its risk management capabilities.
From an investment perspective, the performance of the MORPHO token has indeed seen some ups and downs. From the historical high of $4.17 in January to the current $1.77, the decline is significant. However, if we broaden our perspective, we may find that this price level could be a good entry opportunity. Based on the TVL/market cap ratio, Morpho's valuation is significantly lower than Aave, indicating a certain space for value correction.
Interestingly, Morpho has shown positive performance in multi-chain expansion. In addition to the $4.25 billion TVL on the Ethereum mainnet, there is also $1.95 billion on the Base chain, and Arbitrum, Polygon, and other chains have also performed well. This multi-chain strategy is particularly wise against the backdrop of the current Layer 2 explosion.
The influx of institutional funds is also an important signal. In addition to the Ethereum Foundation, Coinbase also provides users with Bitcoin mortgage services through Morpho, and Crypto.com has announced a cooperation plan. The endorsement from these traditional crypto giants undoubtedly injects a strong boost into Morpho's future development.
However, investment carries risks, and we must also recognize the challenges Morpho faces. The greatest risk comes from the pressure of token releases. According to the established release plan, a large number of tokens will enter the market circulation in the coming months, which may exert some pressure on the price. Additionally, changes in the regulatory environment and counterattacks from competitors are also factors to be aware of.
From the perspective of the technical development roadmap, the launch of Morpho V2 brings more possibilities to the protocol, including fixed-rate loans, RWA asset support, and other innovative features. Especially, the recently launched Morpho Blue allows anyone to create custom lending markets, and this permissionless design philosophy highly aligns with the spirit of DeFi.
Overall, although the MORPHO token may face some fluctuations in the short term, in the long run, the protocol's own innovation and growth potential are still worth paying attention to. Of course, this is not investment advice; everyone should make decisions based on their risk tolerance. After all, in this circle, today's king may become tomorrow's leek; maintaining rationality is the most important.
It must be said that the DeFi lending track is indeed becoming increasingly competitive, with various innovations emerging one after another, providing users with more choices. Whether Morpho can emerge victorious in this competition remains to be seen.
