In the DeFi market, the fund utilization rate refers to the proportion of actual lent funds in the lending pool. The proportion of funds available for lending. This ratio is usually expressed as a percentage and is an important indicator reflecting the liquidity status in the fund pool.

Utilization Rate = Total Borrows / Total Liquidity

If in a loan pool of $10 million, $8 million is being used by the borrower , then the fund utilization rate in this pool at this time is 80%.

A higher level of capital utilization represents strong demand for loans, and the pool is in short supply. At this time, the borrowing interest rate in the pool is also higher. For borrowers, they may face high borrowing costs or even be unable to obtain loans; and for lenders that provide liquidity in the pool, high interest rates mean higher interest income. .

Fund utilization rate is also an important reference indicator for lending platforms. When the utilization rate is too high, the platform may face a liquidity crisis or even a run; on the other hand, when the utilization rate is too low, the platform may not be able to generate revenue through sufficient capital efficiency, thus affecting operating conditions.

Therefore, understanding the changing trends of capital utilization will help users better grasp market trends and trade and invest more wisely and rationally.

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