Gauntlet has proposed interest rate curve increases across Compound V3's L2 WETH markets on Base, Arbitrum, Optimism, Unichain, and Linea, where utilization has remained persistently above the kink rate for an extended period. Optimism and Linea WETH markets are operating above 100% kink utilization, indicating that supply is insufficient to meet borrow demand at current rates. The proposed changes raise both kink and maximum borrow rates to restore utilization toward target levels and improve lender returns.
For Armada's crypto-repo desk, DeFi borrow rates for WETH on major L2 protocols serve as an observable alternative cost of capital that institutional ETH holders evaluate when choosing between on-chain lending and off-chain repo. If Compound L2 rates rise materially following Gauntlet's recommendations, it could make Armada's ETH-collateralized repo terms more attractive by comparison, supporting deal flow from market makers and institutional ETH holders currently borrowing on-chain.