Kamino Lend Monthly Risk Insights

[AllezLabs]

Allez Labs will be sharing deep dives into Kamino’s lending markets, risks, and trends. Follow this topic to stay up to date.

Kamino Monthly Report - January 2025

Kamino experienced impressive growth in January, with total deposits rising by 31% to $3.8B, and borrows increasing by 36% to $1.5B. The Total Value Locked (TVL) reached an all-time high of $2.3B, +28% in January, supported by $10.9B in transaction volume.
Market volatility between January 18-20 led to fluctuations in borrow rates, with SOL market rates spiking to over 50% before stabilizing. DeFi Dollar supply rates declined from 9% to 5.7%, while SOL rates rose from 4.9% to 5.5%.
$7.3M in collateral was liquidated in the Altcoin and Main markets, with no liquidations in other markets, demonstrating resilience. The JLP Market stayed liquidation-free.
USDC remains the dominant stablecoin, showing strong supply growth but posing potential concentration risks. High leverage demand in SOL markets, interest rate volatility, and liquidation clusters require close monitoring.
Check out Kamino January 2025 Dashboard for more details

Overview of Market Performance

Kamino maintained strong market activity throughout January, with robust deposit growth and active borrowing. Total deposits increased to $3.8B (+31%), while borrowing surged to $1.5B (+36%), leading to a 28% rise in TVL to $2.3B, these metrics are at all-time highs. The $10.9B in total transactions, reflects its expanding ecosystem.

Despite this growth, the number of unique wallets increased only slightly to 134,309 (+0.05%), indicating that while capital inflow is strong, user adoption remains relatively stable. The average transaction volume per user reached $81K, suggesting a highly active existing user base.

January saw increased price volatility compared to December, particularly around the 19th & 20th.

Supply/Borrow Trends and Protocol Revenue

The Main market continues to dominate, holding $2.2B in deposits and $934M in borrows. JLP follows with $1.05B in deposits and $343M in borrows, while Jito reached $487M in deposits and $251M in borrows.

JLP and Jito markets experienced notable supply growth, reflecting increased confidence in these segments. However, their higher leverage levels necessitate close monitoring to mitigate risk exposure.

Kamino generated $10.7M in interest revenue from borrowers, with $9.7M distributed to liquidity providers.

SOL & Kamino Dollar

The month was characterized by fluctuations in borrow rates, especially in the SOL market, where rates spiked multiple times, reaching up to 60% between January 18th and 20th. The rapid stabilization highlights responsive user behavior and market efficiency.

Demand for SOL-denominated leverage remains high, with 3.6M SOL deposits (+11%) and 3.3M SOL borrows (+13%). Utilization was stable with a slight rise from 90% to 91%, reflecting strong borrower demand. SOL deposit rates improved from 4.9% to 5.5%, indicating sustained borrowing interest in SOL-denominated assets.

The Kamino Dollar supply increased by 33% MoM to $813M, while borrows grew by 25% to $668M. Despite this expansion, stablecoin utilization declined from 88% to 81%, signalling deleveraging trends. DeFi Dollar supply rates declined from 9% to 5.7%, reflecting this relative reduction in demand.

USDC saw the largest growth in both supply and borrowing, reinforcing its role as the dominant stablecoin.

Transaction Volume and User Behavior

Kamino’s total transaction volume reached $10.8B with a net positive flow, of $4.2B in deposits versus $3.2B in withdrawals.

The global utilization rate grew from 38% to 40%, indicating higher leverage. Borrowing hit record levels, with $1.5B borrowed and $1.3B repaid, signalling sustained leverage demand.

The Main market continues to dominate, followed by JLP and Jito, reinforcing their significance within Kamino’s ecosystem.

Liquidations and Risk Events

The protocol saw $7.3M in liquidations in the Altcoin and Main markets, mostly SOL ($5.5M) and Altcoin longs, with spikes in periods of price volatility on January 13, 19, and 20.

A deeper analysis of distance-to-liquidation metrics reveals that 60% of Jito’s liquidity is within 10% of liquidation, allowed by the correlation of supply and debt asset, demonstrating a high appetite for xSOL/SOL leverage.

The Main, JLP, and Altcoin markets have heavier-tailed liquidation distributions, making them more resilient to minor fluctuations but vulnerable to cascading liquidations in severe downturns.

In case of market shock, the largest exposures — USDC and SOL — would likely be repaid first in a liquidation scenario, they are also most liquid assets able to sustain large transactions with small price impact.

Stress Testing

Total Collateral at Risk & Bad Debt Exposure (ceteris paribus):

• In a -30% market event, $457M would be liquidated, potentially resulting in $2.2M in bad debt

• In a -60% market event, $1B would be liquidated, with bad debt rising to $168M

Conclusions & Risk Considerations

Kamino’s continued growth and increased borrowing demand pushed the protocol to all-time high levels of liquidity alongside higher systemic risks:

• High utilization across stablecoins and SOL markets presents potential liquidity risks during rapid market downturns

• Stablecoin concentration in USDC increases protocol dependency on a single asset, necessitating diversification strategies

• Interest rate fluctuations across markets highlight different risk level offering potential arbitrage opportunities

[AllezLabs]

Kamino Mid Month Update - February 2025

Crypto markets experienced significant volatility in early February, culminating in a major market downturn on February 3rd.
During the crash, SOL dropped by 23% while Altcoins saw drawdowns of up to 51%. Kamino saw $9.2 million in collateral liquidations and $8.7 million in debt repaid via liquidations, demonstrating the resilience of the protocol’s risk framework. Interest rate volatility spiked during the downturn, creating arbitrage opportunities and contributing to rapid market stabilization.
SOL-denominated borrowing demand remains high, while stablecoin utilization dropped from 83% to 79% in the first half of the month, indicating partial deleveraging post-crash.
Jito and JLP markets remain highly leveraged, with the JLP market experiencing its first liquidations since launch.
For an in-depth breakdown of the crash, see the February 3rd Dashboard.

Market Trends

Deposit & Borrowing Activity

February began with heightened volatility, leading to increased activity on the protocol. As prices declined, total deposits fell to $3.6B (-7.3% in Feb), while borrowing dropped to $1.4B (-7.5%). The Total Value Locked (TVL) fell to $2.1B (-8.6%).

Despite these declines, Kamino’s overall transaction volume remains strong, reaching $4 billion by mid-month, with $1.23 billion transacted over the crash weekend. This highlights continued engagement from active users despite market turbulence.

Stablecoin & SOL Markets

While market volatility had limited impact on Kamino’s interest rates, some deleveraging occurred.

Kamino Dollar

• Supplies increased slightly to $837M (+1% in Feb), while borrowing dropped to $658M (-2.4% in Feb)

• Utilization fell from 84% to 79%

SOL Markets

• Deposits grew to 3.8M SOL (+5% in Feb), while SOL borrows reached 3.5M SOL (+6%)

• Borrow rates hit 14.5% at peak but reverted to 8.6%

• Utilization remained steady around 91%

The partial deleveraging in stablecoin markets suggests a risk-off sentiment following the crash, while the demand for SOL-denominated leverage remains high, driven by LSTs and JLP positions.

The February 3rd Market Crash

Macroeconomic uncertainty, including concerns over US trade policies and tariffs, technology stock corrections, and rising Federal Reserve interest rates, which ranged from 4.25-5.5% contributed to a broader reduction in risk appetite across crypto markets. Kamino assets experienced significant selloffs, with drawdowns reaching as high as 51%, leading to notable liquidations.

Kamino users responded quickly to market volatility, topping up their obligations and repaying debt. Liquidation transactions accounted for only 0.7% of the $1.3B transaction volume over the weekend. With an average drawdown of 14% across Kamino assets, a total of $9.2M collateral was liquidated, a level consistent with the January stress test projections.

There was a slight increase in price impact on the USDC/SOL pairs, but liquidity depth remained resilient. Arbitrageurs took advantage of the rapid rate movements, accelerating price discovery and market stabilization.

Kamino’s liquidation mechanism functioned efficiently, ensuring that high-risk positions were cleared without accumulating any bad debt.

Stress Tests

Total Collateral at Risk & Bad Debt Exposure (ceteris paribus):

• In a -30% market event, $477M would be liquidated, potentially resulting in $5.4M in bad debt.

• In a -60% market event, $997M would be liquidated, with bad debt rising to $174M.

Despite lower asset prices compared to January, stress test results indicate only a minor increase in potential liquidations and bad debt exposure, suggesting that Kamino’s risk parameters continue to be effective in extreme market conditions.

Conclusions & Risk Considerations

The February 3rd market volatility showcased the robustness of Kamino’s risk framework. While liquidations were significant, the protocol proved resilient. SOL markets remain highly utilized, while stablecoin markets have shown signs of partial deleveraging.

[AllezLabs]

Kamino Lend Monthly Report - February 2025

February saw one of the sharpest market downturns of the past year, significantly impacting Kamino Lend. Deposits declined by 25% to $2.9B, while borrows fell 28% to $1.1B. This was driven by lower prices with a net positive flow of $3.17B deposits vs $3.13B withdrawals.
Market volatility throughout February triggered substantial liquidations on the protocol totaling $35.2M in collateral seized across 3,616 unique wallets. The Main market was most heavily impacted, accounting for 68% of all liquidation volume.
Despite the market turbulence, Kamino’s liquidation ecosystem performed efficiently, with 80 active liquidators participating.
Interest rates fluctuated in response to volatility, with Dollar borrow rates peaking over 10% multiple times. Ultimately utilization decreased from 81% to 75% for Kamino Dollars and 92% to 74% for SOL, reflecting deleveraging across the platform.
Transaction volume decreased to $7.9B (-28% vs January), concentrated in periods of volatility. Despite these challenging conditions, users remain loyal with 130k unique wallets (down only 3% since last month). The Main market continues to dominate in deposits, followed by JLP and Jito.
Check out Kamino February 2025 Dashboard & February Monthly Snapshot for more details

1. Overview of Market Performance

Kamino Lend experienced significant liquidity contraction in February, with broad-based decreases across key metrics driven by the severe market downturn. Total deposits fell to $2.9B (-25% month-on-month), while borrowing declined to $1.1B (-28% MoM), leading to a 22% TVL reduction to $1.8B.

The number of active positions decreased slightly to 154,891 (-4% compared to January), while the number of unique wallets actually increased to 130,441 (-3%), suggesting users remain loyal despite market conditions.

February was characterized by extreme price volatility, particularly in the latter half of the month when SOL price declined by approximately 35%, from around $200 to $130, with a modest recovery toward month-end. This volatility triggered significant deleveraging across all Kamino markets.

These conditions emphasized the solid liquidator ecosystem with a record number of participants which kept bad debt at zero throughout the downturn.

2. Supply/Borrow Trends and Protocol Revenue

The Main market remains the largest, holding $1.7B in deposits (-23% MoM) and $694M in borrows. JLP follows with $722M in deposits (-31% MoM) and $231M in borrows, and Jito $368M in deposits (-25% MoM) and $183M in borrows.

While all markets experienced significant supply contraction, there was some notable SOL deposit activity, a whale position providing $120M of SOL collateral to borrow USDC.

The overall debt decrease was primarily driven by stablecoin borrowing reduction, while SOL and JitoSOL borrows actually increased by $42.5M, indicating a strategic shift from long to short positions as users adapted to the declining market.

Kamino generated $8.8M in interest revenue from borrowers in February, down 18% MoM, reflecting the reduction in leverage, prices falling and a shorter month.

3. Kamino Dollar & SOL

February saw fluctuations in borrow rates, especially in the SOL market, where rates spiked multiple times throughout the month. The rapid stabilization highlighted responsive user behavior and market efficiency.

Demand for SOL-denominated leverage continued, with a slight 7% increase in SOL borrows to 3.5M. SOL supply grew significantly to 4.7M SOL (+30% MoM), driven by a single 883k SOL deposit. As a result of this large deposit, utilization fell from 90 to 70% pushing the borrow rate from 7.5% to 5%. The market is gradually absorbing this additional liquidity, creating opportunities for borrowers.

Both Kamino Dollar supply & borrows contracted significantly this month, supply by 28% to $694M, and borrows by 23% to $519M. This contraction was accompanied by a slight decline in utilization 81% to 74%, signalling deleveraging trends across the platform. DeFi Dollar supply rates declined from 5.7% to 4.3%, reflecting this reduction in demand.

USDC experienced the largest decline in both absolute supply and borrowing, reflecting its position as the dominant stablecoin.

4. Transaction Volume and User Behavior

Kamino’s total transaction volume reached $7.9B in February, marking a 28% decline from January’s $10.9B. This drop was primarily driven by price action rather than user disengagement. Liquidity remained balanced, with $3.17B in deposits nearly offset by $3.13B in withdrawals.

The global utilization rate held relatively stable at 39%, despite a slight reduction in demand where repayments ($966M) marginally surpassed new borrows ($883M). Transaction activity peaked during the highest volatility periods around February 25-26, demonstrating that users remain actively engaged during market stress. This pattern indicates a measured deleveraging rather than panic selling, with users maintaining positions while adjusting leverage levels.

5. Liquidations and Risk Events

February’s market downturn triggered significant liquidation events, with $35.2M in collateral liquidated across 12,683 positions, impacting 3,616 unique wallets—a nearly fivefold increase from January’s $7.3M.

The majority of liquidations occurred in the Main and JLP markets, with SOL positions accounting for $20.1M and the JLP market seeing $10.2M in liquidations following a 23% price drop. Notably, while the JLP market’s seized collateral represents 97% of all liquidations since its launch, it accounted for 2% of the market’s total collateral JLP deposits.

Kamino’s largest single-day liquidation events occurred on February 25 and 26, coinciding with SOL’s price drop below $140. Liquidation cascades were particularly pronounced in the Main market, where highly leveraged SOL positions were unwound rapidly.

Given the severity of the market conditions – with an average -23% return and an average max drawdown of -37% for assets listed on Kamino – the level of liquidations was remarkably contained. The $35M of collateral seized represents less than 8% of last month’s ceteris paribus stress testing projection for a -30% market event, showcasing effective risk management from both Kamino and its users.

The liquidator landscape has moderate concentration with increased participation of 80 liquidators. The top 11 liquidators, handled 96% of the volume, each seizing more than $1M of collateral. Various liquidations strategies can be observed, some focused on transaction size and others on frequency.

6. Stress Testing

The distribution of collateralization levels has flattened compared to last month, with price action impacting the margin on some positions, while others have been topped up by prudent users managing their risk exposure.

Analysis of distance-to-liquidation metrics confirms that remaining positions have healthier collateralization ratios, with fewer positions within 10% of liquidation compared to January.

In case of market shock, the largest exposures —USDC and SOL— would likely be repaid first in a liquidation scenario, they are also most liquid assets able to sustain large transactions with small price impact.

Total Collateral at Risk & Bad Debt Exposure (ceteris paribus):

• In a -30% market event, $254M (-44% MoM) could be liquidated, potentially resulting in $3.5M in bad debt (+59% MoM)
• In a -60% market event, $823M could be liquidated (-18% MoM), with bad debt rising to $117M (-30% MoM)

These figures represent improved resilience compared to January’s stress test results despite the market turbulence, suggesting that the February liquidations removed the most vulnerable positions.

7. Conclusions & Risk Considerations

February’s market downturn served as a critical stress test for Kamino’s risk systems, which remained effective despite elevated liquidation volumes. The protocol demonstrated strong resilience in handling extreme volatility.

Key risk takeaways:

• Liquidation mechanisms operated as intended, with 80 active liquidators ensuring full market coverage during periods of high volatility.
• The reduction in leverage and utilization rates across markets suggests a more conservative positioning by users, reducing systemic risk.
• Interest rate mechanisms responded appropriately to volatility and to the sudden SOL supply growth, with temporary spikes incentivizing deleveraging when needed.

Going forward, ongoing efforts to diversify stablecoin usage, improve liquidation efficiency during extreme volatility, and continue incentivizing prudent leverage levels will be important for maintaining system stability.