§ 01The quarter in one paragraph
1 2026 was a contraction. Moonwell opened the year at $172.9 million supplied and closed March at $102.9 million, a 40 percent decline. The break came in February, when a cbETH oracle incident and broad deleveraging drove 3,627 liquidations in one month and cut combined supply by more than a third. March stabilized the bleed, but the damage was structural: of the suppliers present at the December close, only 76 percent of wallets and 48.5 percent of their dollars remained at March 31, and bad debt rose across the quarter from $4.3 million to $6.4 million, lodged in illiquid markets. The quarter also retired Moonriver, Moonwell's 2021 origin, and set up Ethereum, approved at quarter's edge.
§ 02KPI dashboard
| Metric | Jan 31 | Feb 28 | Mar 31 | Quarter |
|---|---|---|---|---|
| Combined supplied | $172.9M | $110.7M | $102.9M | −40.5% |
| Core lending | $122.1M | $77.8M | $74.0M | −39.4% |
| Vaults TVL | $50.8M | $32.9M | $29.0M | −42.9% |
| Active suppliers | 19,536 | 17,994 | 17,975 | −1,561 |
| Bad debt (shortfall) | $4.3M | $6.3M | $6.4M | +$2.1M |
| Protocol revenue | $103K | $275K | $53K | $432K total |
| Take rate (annualized) | 0.70% | 3.24% | 0.60% | 1.70% qtr |
The decline was front-loaded into February. January and March bracketed it: a $122 million Core base at the start, $74 million at the end, with nearly the entire step-down in the middle month.
§ 03Multi-month chart pack
Month-over-month dollar retention tells the recovery story the levels obscure: 84.8 percent in January, 63.9 percent in February at the depth, then 87.5 percent in March. The cohort kept leaving across the quarter, but by March those who remained had largely stopped.
| Cohort | M0 | M1 | M2 | M3 |
|---|---|---|---|---|
Dec 2025 20,028 wallets | 100% W 100% | 84.8% W 85.6% | 56.5% W 76.9% | 48.5% W 73% |
Jan 2026 19,536 wallets | 100% W 100% | 63.9% W 83.8% | 56.2% W 79.1% | |
Feb 2026 17,994 wallets | 100% W 100% | 87.4% W 88.3% | ||
Mar 2026 17,975 wallets | 100% W 100% |
§ 04Governance review
Q1 was the busiest governance quarter of the period: 22 proposals, 16 executed, 5 cancelled, 1 queued. The agenda tracked the quarter's arc, from legacy wind-down in January to incident response in February to recovery in March.
| Proposal | Title | Month |
|---|---|---|
| MIP-R38 | Moonriver Complete Deprecation | Jan |
| MIP-B56 | Transfer Vault Risk Curatorship to Anthias Labs | Jan |
| MIP-X43 | Activate OEV Wrappers for Non-Composite Markets | Feb |
| MIP-B57 | Revert cbETH Market Oracle on Base | Feb |
| MIP-B58 | MFAM Onboarding and cbETH Incident Restitution | Mar (queued) |
| MIP-B59 | Add VVV Market to Moonwell on Base | Mar |
The material parameter changes were the cbETH oracle revert (MIP-B57) and its restitution follow-up (MIP-B58), the vault curatorship transfer to Anthias Labs (MIP-B56), additional oracle-value wrappers (MIP-X43), and the only new listing, VVV on Base (MIP-B59). The quarter's sharpest dissent was a cancelled Moonriver admin-migration proposal that drew 94 million WELL against.
§ 05Per-chain quarterly review
Base was the quarter, and the contraction was Base's: Base Core fell from roughly $116 million to $68.6 million, and all five vaults fell with it. Optimism was the quiet exception, ending at $3.9 million Core with utilization climbing to 48 percent, the only chain to add supply in the final month. Moonbeam held near $1.5 million throughout. Moonriver was deprecated in January and left the active set.
§ 06Per-market quarterly deep dives
The large markets diverged sharply. USDC fell from $34.0 million to $18.7 million even as it stayed the most-borrowed market. cbBTC fell hardest among the majors, from $22.7 million to $8.2 million. The standout the other way was MORPHO, which grew every month, from $6.6 million to $8.7 million. cbETH was the quarter's problem market: its oracle was reverted in February after producing distorted rates, and it ended the quarter carrying $1.7 million of the protocol's bad debt.
§ 07Financials and risk
The quarter generated $1.62 million of gross fees and $431,600 of protocol revenue, a 1.70 percent annualized take rate. Both are dominated by February's liquidation wave: $796,000 of the gross fees were liquidation bonuses, and most of the revenue was the 3 percent protocol seize share of liquidated collateral, not recurring interest, so the underlying monetization is far thinner than the headline take rate suggests. Cumulatively through March, Moonwell has produced roughly $4.0 million of gross fees and $539,000 of revenue since inception.
The risk story is the one that should worry a delegate most. Bad debt did not fall as the protocol stabilized; it rose, from $4.3 million in January to $6.4 million by March, and stayed concentrated in three illiquid markets, cbETH ($1.7 million), cbXRP ($1.7 million), and VIRTUAL ($1.4 million), where underwater positions cannot be liquidated profitably. The February liquidation wave cleared the performing collateral and left the bad debt behind.
Across the quarter, Anthias Labs, Moonwell's Base risk partner, worked the bad debt from both ends. End-of-December recommendations raised reserve factors on the incident-affected markets (AERO, VIRTUAL, and cbXRP to 35 percent) to rebuild reserves, the January risk assessment flagged several markets whose caps no longer functioned as effective controls, and after February's cbETH oracle incident the March recommendations added a cbETH interest-rate package, lifting its reserve factor to 20 percent and steepening the curve, explicitly to channel interest toward repaying that shortfall.
§ 08Cross-deployment and token
Across its own deployments, Q1 left Moonwell more concentrated on Base than it began: with Moonriver retired, more than 94 percent of combined supply sat on Base at quarter-end. Ranked against the other Base lending venues at quarter-end, Moonwell was the third-largest by core lending supply, behind Morpho Blue and Aave V3 and ahead of Compound V3, Fluid, Seamless, and Euler. Its $68.6 million of Base core lending kept it an order of magnitude below the two leaders but firmly in the next tier, holding its niche through a quarter that began reshaping the Base lending market around it. The Moonwell vaults are Morpho Blue deposits, counted under Morpho's total, so they are excluded from the ranking to avoid double-counting.
| Rank | Venue | Supplied |
|---|---|---|
| 1 | Morpho Blue | $3.35 billion |
| 2 | Aave V3 | $1.18 billion |
| 3 | Moonwell | $68.6 million |
| 4 | Compound V3 | $41.0 million |
| 5 | Fluid | $39.8 million |
| 6 | Seamless | $5.5 million |
| 7 | Euler V2 | $4.6 million |
WELL fell 21 percent across the quarter, from $0.005374 to $0.004228, a market cap of $19.1 million at the close. Staked stkWELL rose from 23 to 26.2 percent of circulating supply, the governance base deepening even as token price and TVL fell.
§ 09Open questions the data raised
Three questions carry into Q2. First, the bad debt: $6.4 million stuck in illiquid markets that the deleveraging could not clear, so whether it ever resolves or must be written off. Second, the vaults: down 43 percent across the quarter and falling every month even after Core stabilized, so what stops the leak. Third, monetization: a 1.70 percent take rate that is mostly liquidation-driven, so whether the protocol can earn a durable spread from lending itself.
§ 10Looking ahead
Q2 opens with Core lending stabilized, the vaults still leaking, the bad debt unresolved, and Ethereum freshly launched. The questions for the next quarterly are whether Moonwell returns to net growth or settles into a smaller, more concentrated steady state, whether the new Ethereum deployment attracts durable liquidity, and whether the cbETH restitution and the MIP-X56 OEV fee-split change close the loops Q1 left open.