Available Liquidity

Overview

In DeFi lending protocols, users can deposit their cryptocurrency assets into a pool from which other users can borrow. The Available Liquidity refers to the amount of funds in these pools that have been deposited but not yet borrowed. It's an essential metric that provides insight into the protocol's current capacity to facilitate new loans.

How can I use it?

This indicator serves as a direct measure of the protocol's liquidity. High available liquidity indicates that there is a significant amount of capital ready to be borrowed, which can attract borrowers looking for funds.

In addition it also helps in analyzing, interest rates for borrowers, as this are algorithmically determined based on the supply and demand of funds. High available liquidity tends to lower borrowing rates, making it cheaper for users to take out loans, which can increase borrowing activity and overall protocol usage.

Finally, It helps in assessing the risk of liquidity crises. If the available liquidity is low relative to the market size, it might indicate potential liquidity issues, especially if a large proportion of users decide to withdraw their deposits simultaneously.