§ 01Headline finding
ebruary was a deleveraging. As of February 28, 2026, Moonwell held $110.7 million supplied, down 36 percent from January's $172.9 million, with Core lending at $77.8 million and the vaults at $32.9 million. On a constant-price basis the protocol lost a net $48.3 million of supply, liquidations rose roughly fourfold to 3,627 events seizing $7.1 million of collateral, and net dollar retention fell to 63.9 percent from 84.8 percent.
The contraction was overwhelmingly a Base event: Base gave back a constant-price net $47.9 million, split $33.8 million Core and $14.1 million vaults. The single largest borrower from January, a wallet that had topped the supply table at $7.4 million, was liquidated on February 15 for $1.16 million in a wstETH position. And the unwind did not clean the books: bad debt actually grew to $6.3 million from January's $4.3 million, as a cbETH oracle failure added a new pocket of underwater positions that governance spent the month addressing.
§ 02Overview
| Metric | Jan 31 | Feb 28 | Change |
|---|---|---|---|
| Combined supplied | $172.9M | $110.7M | −$62.1M |
| Core lending | $122.1M | $77.8M | −$44.3M |
| Vaults TVL | $50.8M | $32.9M | −$17.9M |
| Active suppliers | 19,536 | 17,994 | −1,542 |
| Bad debt (shortfall) | $4.30M | $6.34M | +$2.0M |
| Protocol revenue | $103.2K | $275.2K | +$172.0K |
These levels are oracle-priced at each month-end, so the change reflects both flows and token price drift; the constant-price net flow is given in the headline.
| Chain | Core supplied | Vaults TVL | Combined | Core borrowed | Core utilization |
|---|---|---|---|---|---|
| Base | $72.9M | $32.9M | $105.8M | $29.6M | 40.7% |
| Optimism | $3.0M | $0 | $3.0M | $800K | 28.0% |
| Moonbeam | $2.0M | $0 | $2.0M | $40K | 2.0% |
| Moonwell total | $77.8M | $32.9M | $110.7M | $30.5M | 39.2% |
Core supply fell 36.3 percent, vault TVL 35.2 percent, the combined total 35.9 percent. Active suppliers eased to 17,994 from 19,536. Core utilization held near January's level at 39.2 percent. All USD figures are constant-price, read from the Moonwell oracle at the end-of-month block on each chain.
The deleveraging cut supply by a third but did not clear the bad debt. It grew, from $4.3 million to $6.3 million.
§ 03Markets and real yield
The large Base markets roughly halved: USDC to $19.2 million supplied from $34.0 million, cbBTC to $10.5 million from $22.7 million. MORPHO was the exception, growing to $10.0 million, the only material market to expand. WETH ran the hottest large market at 90.4 percent utilization.
| Market | Supplied | Borrowed | Utilization | Base supply APY | Base borrow APY |
|---|---|---|---|---|---|
| USDC | $19.2M | $12.5M | 65.1% | 3.10% | 5.35% |
| cbBTC | $10.5M | $1.4M | 13.4% | 0.10% | 0.83% |
| MORPHO | $10.0M | $400K | 3.8% | 0.02% | 0.89% |
| WETH | $8.4M | $7.6M | 90.4% | 3.80% | 4.69% |
| AERO | $4.8M | $900K | 19.4% | 0.57% | 4.57% |
| wstETH | $4.7M | $600K | 12.8% | 0.08% | 0.78% |
| cbXRP | $3.5M | $2.2M | 63.0% | 9.92% | 25.99% |
| LBTC | $2.7M | $100K | 3.5% | 0.01% | 0.21% |
Stripping WELL incentives from the base rate, no clean market paid a real premium over the 3.74 percent T-bill in February. USDC suppliers earned 3.10 percent base, below risk-free, lifted to 4.06 percent only with a near-one-point WELL boost. The high cbETH (17.2 percent) and VIRTUAL (55.1 percent) rates are distortions from stressed conditions and the cbETH oracle issue, not durable yield.
| Market | Base supply APY | WELL incentive | All-in supply APY |
|---|---|---|---|
| WETH | 3.80% | +0.33% | 4.13% |
| USDC | 3.10% | +0.96% | 4.06% |
| EURC | 2.11% | +0.10% | 2.21% |
| cbXRP | 9.92% | +0.21% | 10.14% |
§ 04Wallets and risk
Concentration ticked up as smaller positions left: the top 10 wallets held 27.3 percent of supplied value and the top 50 held 53.6 percent. USDC and WETH together were 68 percent of all borrowing. The risk read worsened despite the liquidation wave: $6.3 million of borrower positions ended the month in shortfall, up from $4.3 million in January, with 136 positions already below a health factor of 1.0. The new pocket was cbETH ($1.6 million of bad debt), joining cbXRP ($1.7 million) and VIRTUAL ($1.4 million) as the markets where underwater positions accumulate faster than liquidators clear them.
| Market | Shortfall |
|---|---|
| cbXRP | $1.72M |
| cbETH | $1.57M |
| VIRTUAL | $1.43M |
| WETH | $480K |
| Total (all markets) | $6.34M |
On the parameter side, Anthias Labs' February recommendations were routine and predated the oracle incident: incremental cuts to LBTC and tBTC collateral factors to separate their risk from cbBTC, flatter interest-rate curves on the low-utilization BTC markets, and another increase to the WELL borrow cap.
§ 05Liquidations
Liquidations were February's defining stress signal: 3,627 events seizing $7.11 million of collateral against $6.46 million of debt repaid, versus 971 events and $1.60 million in January. Base carried 2,715 events and $7.02 million of the value. The activity clustered in mid-February and in two collateral types, wstETH ($2.34 million across 107 events) and cbBTC ($2.32 million across 412).
| Collateral | Seized | Events |
|---|---|---|
| wstETH | $2,341,000 | 107 |
| cbBTC | $2,319,800 | 412 |
| AERO | $897,800 | 351 |
| WETH | $648,900 | 980 |
| cbXRP | $206,000 | 91 |
| All collateral, all chains | $7,111,200 | 3,627 |
Liquidations concentrated among a few operators working the stress. The most active address cleared 768 liquidations for $110,100 of gross profit.
| Liquidator | Gross profit | Volume | Events |
|---|---|---|---|
| 0xf4cd…ec68 | $110,100 | $1.20M | 768 |
| 0x4de9…eb60 | $98,000 | $1.09M | 182 |
| 0xe3bc…ba07 | $96,400 | $1.06M | 78 |
Profit is gross; a net-of-gas breakdown is not stored and is noted as a gap.
§ 06Vaults
The Moonwell-Morpho vaults fell to $32.9 million from $50.8 million, a constant-price net outflow of $14.1 million. The Flagship USDC and ETH vaults remained the largest; the Ecosystem USDC vault nearly emptied, to about $200K.
| Vault | TVL |
|---|---|
| Flagship USDC | $15.5M |
| Flagship ETH | $9.8M |
| Flagship EURC | $4.3M |
| Frontier cbBTC | $3.2M |
| Ecosystem USDC | $200K |
| All vaults | $32.9M |
§ 07Financials
Gross fees more than doubled to $969,500, but the rise was the liquidation wave, not healthy growth: liquidation bonuses alone were $646,300 of it. The same wave drove protocol revenue to $275,200, almost entirely the 3 percent protocol seize share of liquidated collateral, lifting the annualized take rate to a one-off 3.24 percent from January's 0.70 percent. It is a stress-driven figure that will not persist.
| Line | Amount |
|---|---|
| Gross fees: borrower interest | $307,900 |
| Gross fees: liquidation bonus | $646,300 |
| Gross fees: Morpho vault performance | $15,400 |
| Total gross fees | $969,500 |
| Protocol revenue (all sources) | $275,200 |
| Annualized take rate | 3.24% |
Seized collateral is valued on the oracle basis the liquidations actually executed on. February's cbETH oracle incident decoupled that basis from market price; valued at market, the protocol's liquidation revenue would read higher, closer to third-party trackers such as Token Terminal. The oracle basis is used here for internal consistency with how the liquidations cleared on-chain.
§ 08OEV
OEV recaptured rose to $369,300 across 45 events, tracking the liquidation surge. The protocol capture share is omitted pending a correction to how OEV capture was calculated.
§ 09Governance
Four measures executed (two after an initial procedural version was cancelled), dominated by oracle and incentive maintenance during the stress.
| Proposal | Title | Voters |
|---|---|---|
| MIP-B57 | Revert cbETH Market Oracle on Base | 410 |
| MIP-X43 | Activate OEV Wrappers for Non-Composite Markets | 289 |
| MIP-X42 | Anthias Labs Monthly Recommendations (Feb) | 288 |
| MIP-X44 | Automated Liquidity Incentive Proposal | 381 |
MIP-B57, reverting the cbETH market oracle on Base, drew the broadest participation of the month at 410 voters and is the governance counterpart to both the cbETH rate distortion in §03 and the cbETH bad debt in §04. MIP-X43 activated oracle-value wrappers on more markets, the first step toward raising the OEV capture rate.
§ 10Cross-deployment and token
Ranked against the other Base lending venues, Moonwell was the third-largest by core lending supply at the February close, behind Morpho Blue and Aave V3 and ahead of Fluid, Compound V3, Seamless, and Euler. Its $72.9 million of Base core lending held that position even as the whole Base lending market contracted with it. The five Moonwell vaults are Morpho Blue deposits, counted under Morpho's total, so they are left out of the ranking to avoid double-counting.
| Rank | Venue | Supplied |
|---|---|---|
| 1 | Morpho Blue | $2.95 billion |
| 2 | Aave V3 | $1.27 billion |
| 3 | Moonwell | $72.9 million |
| 4 | Fluid | $59.7 million |
| 5 | Compound V3 | $42.6 million |
| 6 | Seamless | $5.6 million |
| 7 | Euler V2 | $4.6 million |
WELL fell with the market, closing February at $0.00427 for a $19.4 million market cap. Staked stkWELL held at 24.9 percent of circulating supply, roughly steady through the stress.
Methodology
§ 11Looking ahead
After a 36 percent drawdown, March's question is whether the bleed stops and whether the $6.3 million of bad debt clears or festers. Watch Core supply near $70 million, net dollar retention off its 64 percent low, MORPHO holding its gains, and the OEV capture rate now that MIP-X43 has activated more wrappers.