Loan Roll Rates (Forward)
November 14th, 2024
By October 2024, less than 10% of loans rolled forward into a state of higher utilization as a result of the generally strong crypto market.
Utilization "buckets" can be seen as a proxy for delinquency when compared to Traditional Finance.
Wallets that roll forward into higher utilization (delinquency) buckets are more likely to liquidate i.e. reach a 'bad' state.
The observed spikes in roll rates in September 2023, April and August 2024 are due to changes in market prices. See below 👇
Correlation between ETH Price change and Roll Rates
Unlike the Traditional Finance lending market, loans on-chain are negatively impacted by significant price changes if the collateral deposited is not a stablecoin.
The chart below illustrates the correlation between the change in the price of ETH and the increase in roll rates.
Simplified: When there is a sudden & significant drop in the price of ETH, there is an increase in utilization causing forward rolling movement which ultimately leads to more liquidation events.