Utilization rate
Last updated
Last updated
Each asset on the Apollo protocol has its own Utilization rate (U):
TotalBorrows - The total asset amount (in dollars) borrowed by the protocol users
TotalLiquidity - The total asset amount (in dollars) present on the protocol
The Utilization rate (U) monitors how much of an asset's reserves are borrowed in a given time frame (t).
As the U value approaches 100%, the asset becomes scarcer. If it reaches 100%, there is no more liquidity available for that asset. This situation poses a problem, as depositors run the risk of being unable to retrieve their assets from the protocol due to their unavailability.
Nevertheless, high U results in high returns for depositors. It's therefore essential to maximize utilization while protecting their liquidity.
Monitoring historical U rates is recommended, as it can assist in tracking emerging risks related to the liquidity shortage of a specific asset on the protocol.
