MegaETH Stablecoin Supply Grew 800%, Lending Liquidity Flees Aave, and more...
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In this letter, we bring you the best bottom-up analysis of onchain trends, along with top-down market analysis, helping you find top yield opportunities and position for trends before they happen
1. Broader Market Outlook
2. Stablecoin flows per chain
3. DeFi token price gainers & their catalysts
4. TVL gainers - for protocols above $50M
Key Takeaways
Lending liquidity is migrating away from Aave. Aave’s TVL is recovering slowly but remains far below pre-Kelp levels. Meanwhile, Morpho and Euler are absorbing the flow.
Stablecoin growth remains stalled but USDe stabilized — credit crunch healing. Total flow at +$158M (+0.05%), second straight week of near-zero net growth. The big signal: USDe rebounded +$151M after losing -$1.59B last week, confirming the credit crunch is easing.
MegaETH grew 800% in stablecoin supply, and the driver is a symbiotic Ethena loop, not just TGE hype. The "Megaavethena" loop on Aave MegaETH (deposit USDe → borrow USDm → swap for USDe → repeat) offers ~25% max ROE, materially higher than liquid leverage elsewhere.
Trading Calendar 🗓️
This week’s macro is the NFP announcement on Friday, May 9 — the first major US labor print after FOMC, and the data Powell flagged as input for the next rate decision. A hot print reinforces the “no rush to cut” stance; a soft print reopens the cut conversation.
A quieter week for macro after FOMC, but token unlocks dominate.
BTC ETFs absorbed $824M on the last week of April and another $163M this week, the inflow streak ran 9 days through April 27 before pausing on April 29. ETH ETFs went slightly negative this week (-$83M after +$155M last week).
Combined inflows of ~$80M this week vs ~$979M last week show institutions pulled back the aggressive accumulation
1. Stablecoin Flows
Weekly flow: +$158M (+0.05%). Second straight week of near-zero net growth. After two consecutive +$2.5B weeks in early April, stablecoin growth has effectively stalled.
The strongest inflows came from USDS, RLUSD, USDe, and USD1. USDS added $444M, confirming a second week of recovery as capital continues rotating into Sky’s cleaner collateral profile. USDe added $151M after last week’s sharp contraction, which is one of the more important healing signals: Ethena’s basis trade is no longer seeing the same level of forced redemption pressure.
The weakest flows remain in USDC, USYC, USDtb, and USDT. USDC lost another $522M, marking continued contraction and reinforcing the view that DeFi-native capital is still being withdrawn or redeployed cautiously. USDT’s $209M outflow looks less significant after the prior week’s large inflow, while USYC and USDtb weakness shows that regulated/RWA stablecoin rotation has paused for now.
USDC -$521.8M (-0.67%) — third straight week of contraction, making it one of the clearest DeFi risk-off signals. Because USDC is heavily used across Ethereum DeFi lending markets, continued USDC contraction suggests capital is still being pulled from core DeFi venues or redeployed into safer yield structures.
USDT -$208.7M (-0.11%). Big swing from last week’s +$2.53B inflow. Worth noting given the magnitude, but a single weekly print after a record inflow likely reflects normal redemption cycles rather than a structural shift.
Other movers: RLUSD +$170.7M (+12.23%, growing fast), USD1 +$126.2M (+2.87%), USDD +$55.8M (+4%). USDtb -$269M continued bleeding identical to last week. PYUSD -$47.5M, USYC -$314M — the regulated tier rotation thesis remains paused.
2. Stablecoin Flows Per Chain✅
Ethereum lost another $1.58B in stablecoin supply this week. Combined with last week’s -$167M, that’s nearly $1.75B of stablecoin contraction on Ethereum in two weeks. This is the second-largest move in the dataset and it’s directly tied to USDC’s three-week bleed (USDC is mostly on Ethereum).
Tron absorbed $1.6B alone — the USDT emerging-markets payment rail keeps doing its job.
MegaETH’s Stablecoin Supply Grew 824%
MegaETH +$651M (+824%) is the standout new-chain story, but the mechanism deserves attention. The growth is concentrated almost entirely on Aave, which now hosts the bulk of MegaETH’s TVL ($575M+ on Aave by May 2, per The Defiant).
The driver is a stablecoin loop that’s drawing capital because of unusually high incentives:
The “Megaavethena” loop: Deposit USDe → borrow USDm → swap for USDe → repeat. USDe on MegaETH’s Aave has a unique yield pass-through (~3% base, similar to sUSDe) plus ~3% Ethena Merkl rewards. USDm borrowing has its own incentives that keep borrow costs low. Reported max ROE on the loop is around 25% — materially higher than liquid leverage on other chains.
Why caps keep getting raised: USDe supply cap on Aave MegaETH was filled, and a proposal on May 3 raised it from $100M → $200M. USDm cap is also at limit. These caps will keep getting raised because USDm supply is one of MegaETH’s most important KPIs for unlocking MEGA token rewards.
The flywheel: USDm yield flows to the MegaETH Foundation, which uses it to buy back MEGA. Higher TVL = more KPI progress = more MEGA unlocks = more incentives to keep TVL flowing in.
Why does this matter? And where is the risk:
Over 70% of MegaETH’s TVL is Ethena-related (USDe, USDm backed by USDtb). Ethena itself is one of the largest USDm suppliers and earns 5% MEGA rewards on the position. The structure is effectively MegaETH paying Ethena to speed-run KPIs while Ethena rebuilds USDe TVL after last week’s -32% contraction. It works as long as MEGA emissions last. Once incentives compress, expect the loop to unwind.
Hyperliquid’s TVL reversed from last week’s outflow thanks to their new HIP-4 prediction markets platform launch by Outcome.xyz, which now enables binary bets on Bitcoin’s price, and will launch more markets across crypto events, sports, politics, and others. You can trade it on the “outcome” tab on the main Hypercore interface.
3. DeFi token price gainers & their catalysts
$ORCA +58.5% — Continuation of last week’s network-wide Solana DEX volume surge. Both ORCA and Raydium spiked together (RAY +11.5%), suggesting an ecosystem demand event rather than token-specific catalyst. The 24-month Orca DAO buyback program (approved 2025) provides structural tailwind.
$PENDLE +27.8% — Pendle’s RWA market is becoming the dominant on-chain venue for fixed-rate yield (see TVL section). PT-USDG went live on Aave at 20%+ APY, STRC ecosystem crossed $265M tokenized on Ethereum, new RWA pools from Ember/Midas/Ethena launched. The token is moving with real product velocity, not just narrative. ($285M cap, real signal.)
$ONDO +18.1% — Three concrete catalysts this week, all institutional. Ondo was selected for DTCC’s Industry Working Group to advance tokenization in the U.S., alongside BlackRock, Goldman Sachs, J.P. Morgan, Franklin Templeton, Morgan Stanley, Bank of America, Citadel Securities, NYSE Group, Circle, Robinhood and others.
The DTCC custodies $114T+ in assets and clears $3.7Q+ annually — having Ondo at the design table is a serious signal for tokenized US capital markets. Also this week: 260+ Ondo tokenized stocks and ETFs went live on KuCoin Web3 Wallet (Apr 30), and Ondo announced a partnership with Broadridge to bring proxy voting and investor communications to tokenized stock holders.
Ondo is now the largest platform for tokenized stocks at ~70% market share, with $825M+ TVL across 250+ tokenized assets. Sources: Ondo Finance X (Apr 30-May 4).
$JTO +14.5%, $RAY +11.5% — Solana DEX/staking continuation. Both move with broader Solana DeFi sentiment, supported by the network-wide volume surge.
4. TVL gainers - for protocols above $50M
Lending liquidity is migrating away from Aave
The TVL data suggests the Aave shock is no longer just a temporary event. Aave TVL is slowly recovering, but it remains far below pre-incident levels, while alternative venues like Morpho and Euler are seeing more interesting growth.
Capital still wants yield, but it wants isolated risk, cleaner collateral, and clearer market structure. The protocols below sort into four buckets: alternative lending venues, RWA-backed yield, non-crypto-correlated yield, and new-chain incentive farming.
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