Crypto lending rates are showing a pullback in borrow demand after WETH supply jumped nearly 79% while yields fell, according to Keyrock.
Crypto traders appear to be reducing leverage after a sharp repricing across rates, derivatives and on-chain flows, analysts say.
Keyrock, a crypto market maker and digital asset firm, said in a June 8 market update that on-chain lending markets showed a clear deleveraging pattern this week. Wrapped Ethereum supply rose 78.6% from a week earlier, while its supply APY fell more than 37%.
That means more ETH▲$1,691.58 holders appear to be parking tokens in lending markets for yield, while fewer traders are borrowing against that supply.
Keyrock argues the move fits with an 18% drop in ETH open interest and a flip in funding rates, both signs that leveraged long positions were being reduced.
In the case of stablecoin lending, there were also signs of deleveraging:
- For example, the supply of USDC▲$0.9997 surged by 28.4% while its lending rate went down by nearly 6%, reaching 3.3%, indicating that capital was flowing to yield-rich positions.
- Supply in USDT▼$0.9993 grew just by 4.3%, but its rate was down by 20.2%, indicating a sharper decrease in borrow demands for the stablecoin.
Read also: Can Bitcoin Crash to $20K in 2026? What Could Trigger a Historic Crypto Market Collapse
On-chain Capital Also Rotated
Arbitrum, the L2 network for Ethereum, had the largest inflows at $682 million on a weekly basis, owing to the DeFi ecosystem, stated the researchers. At the same time, Coinbase‘s L2 network Base saw $157 million.
Meanwhile, Hyperliquid saw the biggest outflow among L2s with $609 million as HYPE▲$62.82 broke its all-time high last week. The Ethereum mainnet also recorded $246 million outflows, the data shows.
“The aggregate read is capital fleeing higher-beta and higher-leverage venues toward DeFi-rich L2 defaults,” Keyrock said, noting that WETH supply is now the clearest forward signal.
Watching for WETH to stay above $700 million in the next print will indicate that de-risking continues, the analysts said, adding that the figure below $400 million in the next two weeks will tell that leverage has returned to lending markets.
