Arc Market Sees Massive USDC Inflow, But Borrowers Remain Idle

Aave's Arc market on the Layer-1 network went live on September 16 and attracted $76 million in USDC, but saw less than $100,000 borrowed. This left utilization at a mere 0.1%, indicating that most of the deposited liquidity remained idle.

LlamaRisk proposed an increase in the Arc Main Spoke's USDC add cap from $56 million to $150 million after suppliers quickly filled the market's initial capacity. However, the proposal did not explicitly state whether this would also affect the draw cap.

The launch figures showed a clear distinction between supply-side capacity and credit use, with the maximum supply through the spoke at $56 million and the maximum borrowing through the spoke at $51 million. The proposed increase in the add cap would nearly triple the original supply-side ceiling without changing the draw cap.

For Arc to prove itself as a viable credit market, borrowers must begin drawing from the deposited liquidity. If utilization remains low, it will indicate that users view the market primarily as a place to park USDC rather than as a source of credit.