Lending and borrowing protocols saw the largest gains as institutions sought yield. Morpho Ecosystem in particular benefited from optimized capital efficiency that reduces borrowing costs.
Experts warn that large leveraged staking positions — borrowing assets to stake and earn yield — create interconnected risk. A single large liquidation could trigger cascading failures across multiple protocols.
The concentration of capital in a few major lending protocols means a single smart contract failure or market shock could lock significant institutional capital. Diversification across DeFi remains critical.
When institutions enter DeFi, they don't just buy and hold. They deploy leverage and complex strategies. These strategies amplify gains in calm markets but can trigger systemic cascades during volatility.
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