rates in DeFi are too low for the level of risk $11.7B sitting in Morpho vaults today at 2-4% APY. retail is funding these markets via exchanges thinking it's a savings account. it's not. they're taking real credit risk on crypto-collateralized lending no institution accepts near risk-free rates to come on-chain not all vaults are created equal. same 2-4% yield but completely different risk profile (different curators, collateral, LLTVs). retail picks the highest number. farmers will farm back in the day >100% APYs in DeFi made sense. you were compensated for the risk you were taking. DeFi is a different animal today but vol, historical dislocations, and looping strategies on crypto collateral still demand at least 300-400 bps above risk-free. we're nowhere near that. @LucaProsperi ran the math (see below). tldr - fair value spread on ETH/BTC-collateralized lending is 250-400 bps above risk-free. observed rates are a fraction of that last cycle we saw a lot of retail pour savings into algo stablecoins promising "risk free" yield. this cycle vaults have a lot of demand but they are mispriced for the level of risk. you're trusting someone to LP into vaults and trust the manager will manage position at least private credit earned you 12-16% go read this: