§ 01Headline finding#

The deleveraging slowed sharply. As of March 31, 2026, Moonwell held $102.9 million supplied, down 7.0 percent from February against the prior month's 36 percent collapse. The constant-price net outflow fell to $7.5 million from $48.3 million, net dollar retention rebounded to 87.5 percent, and liquidations returned to a normal 335 events. But the bad debt did not clear: $6.4 million of borrower positions remained in shortfall, essentially flat on February, lodged in the illiquid cbETH, cbXRP, and VIRTUAL markets.

Where February broke, March steadied. Core lending eased only 4.9 percent to $74.0 million; the vaults gave back 12.0 percent to $29.0 million. Optimism was the lone chain to grow. The wallets that survived February largely stayed and stopped withdrawing. Governance shifted from crisis to recovery: a cbETH incident restitution proposal entered the queue, Moonriver withdrawals were restored, and the vote-collection system shed a cross-chain dependency. The one thing recovery did not touch was the underwater collateral that liquidators cannot profitably clear.

§ 02Overview#

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.

Month-over-month declines were a fraction of February's: Core down 4.9 percent, vaults down 12.0 percent, combined down 7.0 percent. Active suppliers held flat at 17,975. All USD figures are constant-price, read from the Moonwell oracle at the end-of-month block on each chain.

§ 03Markets and real yield#

The market table looked much like February's, a sign the contraction had paused. USDC held at $18.7 million, MORPHO at $8.7 million, WETH at $8.6 million, cbBTC at $8.2 million. cbETH's rate distortion eased as its oracle was restored, its base supply APY falling to 7.1 percent from 17.2 percent.

On real yield, USDC slipped to 2.75 percent base, below the 3.74 percent T-bill, clearing it only with a full point of WELL (3.80 percent all-in). Dollar suppliers again earned under the risk-free rate from real lending alone.

§ 04Wallets and risk#

Concentration eased back toward January levels as the panic subsided: top 10 at 25.2 percent, top 50 at 51.4 percent. The risk read, though, barely improved. Collateral within 10 percent of liquidation fell to $5.6 million, but bad debt held at $6.4 million, with 137 positions still below a health factor of 1.0. The shortfall stayed concentrated in cbETH ($1.7 million), cbXRP ($1.7 million), and VIRTUAL ($1.4 million), the same illiquid markets where liquidation is unprofitable. Recovery returned to the performing book; the bad debt did not move.

Anthias Labs' March recommendations addressed the bad debt directly: a cbETH interest-rate package, raising its reserve factor from 15 to 20 percent and steepening the curve, designed to direct a larger share of interest toward repaying the cbETH shortfall left by February's incident, alongside borrow-cap cuts on cbBTC, AERO, and wstETH.

§ 05Liquidations#

Liquidations returned to baseline: 335 events seizing $42,300 of collateral against $38,500 of debt repaid, a collapse from February's 3,627 events and $7.1 million. The forced unwind was over, though the residue it left behind (the bad debt above) was not.

§ 06Vaults#

The Moonwell-Morpho vaults eased to $29.0 million from $32.9 million, a constant-price net outflow of $4.6 million, milder than February's $14.1 million. Flagship USDC and ETH remained the two largest at $11.5 million and $10.9 million.

§ 07Financials#

With the liquidation wave gone, gross fees fell back to $221,100, mostly borrower interest ($205,700). Protocol revenue was $52,800 at a 0.60 percent annualized take rate, between January's 0.70 percent and February's stress-inflated 3.24 percent. Monetization remained thin and interest-driven.

§ 08OEV#

OEV recaptured fell to $19,900 across 5 events with the quiet liquidation month. The protocol capture share is omitted pending a correction to how OEV capture was calculated.

§ 09Governance#

March was the busiest governance month of the quarter, nine proposals turning to recovery and infrastructure.

MIP-B58 paired MFAM onboarding with restitution for the cbETH incident, governance's acknowledgment that February's oracle distortion caused user losses, the same cbETH that still carried $1.7 million of bad debt. MIP-B59 added a VVV market on Base, the quarter's only new listing. A Moonriver admin-migration proposal was cancelled after drawing 94 million WELL against, the quarter's sharpest dissent.

§ 10Cross-deployment and token#

Ranked against the other Base lending venues, Moonwell was the third-largest by core lending supply at the March close, behind Morpho Blue and Aave V3 and ahead of Compound V3, Fluid, Seamless, and Euler. Its $68.6 million of Base core lending held the third spot as the Base market reshaped around it: Aave V3 on Base kept shrinking, to $1.18 billion from $1.50 billion in January, while Morpho Blue held above $3 billion. 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.

WELL closed March at $0.004228, a $19.1 million market cap. Staked stkWELL rose to 26.2 percent of circulating supply, up from 23 percent in January, a steady deepening of the governance base even as TVL fell.

§ 11Looking ahead#

With the bleed slowed and retention restored, April tests whether Moonwell returns to growth or settles smaller. Watch whether Core supply holds near $74 million, whether the stuck $6.4 million of bad debt finally erodes, whether Optimism's small expansion continues, and whether the OEV capture rate improves now that more wrappers are active.