Morpho Loans Exceed $5.8 Billion: Growth Driven by Application Traffic or Reward Subsidies?

Who is managing Morpho's funds? Three treasury managers control nearly 70% of the assets, with $5.8 billion in loans concentrated in a few hands.

Written by: @0xHakai_

Compiled by: AididiaoJP, Foresight News

Morpho's loan scale has surpassed $5.8 billion. Among this, floating rate market loans amount to $5.77 billion, corresponding to $6.42 billion in deposits; the newly launched fixed-rate tier, Midnight, has an additional $58.4 million in loans. Three treasury managers control 69.7% of the listed treasury assets.

In the past 12 months, Morpho has issued approximately $49 million in rewards, roughly equivalent to one-third of the interest paid by borrowers. These rewards now primarily come from stablecoins, collateral assets, and public chain incentive activities, rather than from the DAO. This article follows the flow of funds to question: who is allocating the funds, who is spending to retain borrowers, and whether borrowers' arbitrage trades are profitable.

Applications Bring in Loans

Morpho's growth mainly comes from being used as a lending backend by applications and issuers: Coinbase's crypto asset collateral loans, Robinhood Earn, PayPal's PYUSD, and Ripple's RLUSD.

Loans have grown by 97% year-on-year, increasing from $2.92 billion to $5.77 billion; deposit supply has grown by 91%. Just Coinbase's borrowing product had $1.73 billion in active loans as of October 26.

A Few Treasury Managers Control the Funds

Anyone can create a Morpho treasury, but the listed capital is highly concentrated. SteakhouseFi, SentoraHQ, and SparkDAO manage 69.7% of the listed treasury assets, with Gauntlet following closely behind.

Behind these names are the Steakhouse treasury used for Coinbase USDC lending, the Steakhouse USDG treasury on the Robinhood Chain, and Sentora's PYUSD ($658 million) and RLUSD ($481 million) businesses. Among the assets of the five major managers, three-quarters are already in Vaults V2; part of the reason is that managers migrated depositors from V1.

In the past 12 months, managers have recorded a total of $11.85 million in fees, only counting on-chain treasury fees. Steakhouse leads with $4.72 million, followed closely by Sentora with $2.73 million, with 80.7% being performance fees. The protocol's own fee switch is turned off, so there is no income.

Gauntlet's managed tracking assets fell from $1.3 billion at the end of October 2025 to $749 million a month later. This decline coincided with the collapse of Stream Finance and Elixir deUSD. Gauntlet claims it has no xUSD exposure.

Additionally, there is $173.4 million, accounting for 2.6% of all treasury assets, held in treasuries not displayed on the Morpho interface. Most of this is authorized funds managed for integrators such as Trezor, MetronomeDAO, and Safe, often also operated by the same batch of managers on the leaderboard. The term "not displayed" simply means it is not shown on the interface; whether it is accessible is another matter.

Who Pays for the Rewards

In the past 12 months, rewards totaled $49.04 million, roughly equivalent to one-third of the $149.33 million in interest paid by borrowers. Managers do not share in the rewards; they only indirectly benefit from lower borrowing costs leading to more loans.

DAO's contributions have noticeably shrunk. After May 2026, its incentive activities dropped from about $2.6 million per month to between $29,000 and $318,000, accounting for only 3.6% of total rewards by September.

The bulk of the rewards has now shifted to external activities. In terms of amount, Sentora's incentive activities top the list at $14.27 million, primarily directed towards the PYUSD and RLUSD treasuries. Following that are public chain incentives: Arbitrum DRIP at $6.76 million and Monad Foundation at $3.72 million. Ethena and Sky contributed $2.68 million and $1.72 million, respectively.

Not all businesses require rewards. The largest market—Coinbase cbBTC/USDC on Base—has never launched its own Merkl activity. In October 2025, the DAO created 85% of the Merkl rewards; by September 2026, this proportion had dropped to just 3.6%.

Full Load is a Design Result

The utilization rate is currently at 89.9%, just below Morpho's AdaptiveCurve rate model target of 90%. This model adjusts rates to stabilize each market at this level.

In the four weeks ending October 25, $4.06 billion in deposits were concentrated in markets with utilization rates between 90% and 95%, with only $98 million below 80%. The buffer space is thin, and this is part of the design: when the market is at full load, rising rates attract new depositors while also prompting borrowers to repay. In 2026, the utilization rate for stablecoin loans has remained between 81% and 90%.

Is Arbitrage Still Profitable?

Since its inception, in 30 markets, using sUSDS as collateral to borrow stablecoins has yielded a positive interest spread after deducting borrowing costs. The total is approximately $635,000, with 84% of the days being positive.

sUSDe has roughly broken even. USDe lost about $13.5 million, primarily occurring in the 2024 market; these markets used Ethena points to pay borrowers, while the model does not value the points. Subsequently, as rewards passed through, Ethena's staking yields turned some markets to positive returns.

The price of principal tokens on the oracle is much better than the market price. The oracle discount for PT-USD3 implies a +22.04 point interest spread, while the market price only offers +6.26. On August 25, trades in the Pendle pool lowered the price read by the oracle, leading to 33 liquidations involving $36.1 million in PT-reUSD loans within 14 minutes. Neither market generated bad debts, and the losses were borne by the borrowers.

Steakhouse Financial stated on August 26 that the fundamental principle of setting up lending markets is: market parameters, including oracles and liquidations, exist to protect lenders. When lenders are unwilling to lend, the entire market shrinks.

Fixed Rates Arrive

Loans in the fixed-rate tier Midnight increased from about $3.5 million on October 7 to $58.4 million on October 26. Previously, Coinbase launched this product for users on September 22, and Ethena and Maple also increased their lending quotes.

Lenders publish signed quotes while funds still earn floating rates in Morpho Blue; liquidity only shifts when borrowers accept the quotes. Fixed rates typically include a premium, and the locked-in interest spread is more certain but also narrower.

Three Things to Watch Next

First, whether managers will use the Midnight treasury adapter to funnel pooled funds into fixed-term credit. Second, whether governance will enable the fee switch, which can take up to 25% of borrowers' interest. Third, how much demand the PYUSD and RLUSD treasuries can retain; the rewards for these treasuries are distributed at the treasury level, and a few large depositors hold most of the assets.

Managers and applications have brought Morpho to $5.8 billion in loans. Whether this growth can continue depends on how much of the demand funded by rewards can remain after the incentive activities end.