Morpho Adds Fixed-Rate Loans, Expanding While the Rest of DeFi Lags

Morpho is a DeFi platform where users can lend and borrow crypto without going through a bank. Like other onchain lending platforms, Morpho uses automated blockchain programmes to manage loans and collateral.

Dubbed Morpho Midnight, the new protocol lets lenders and borrowers choose the interest rate, loan length, collateral and parties involved, according to a press release. Markets can also be limited to participants who meet certain compliance requirements.

The launch marks an effort to expand the types of credit available through DeFi as most DeFi loans have interest rates that change with market demand and no set end date. Morpho said Midnight aims to make terms more predictable, similar to those commonly used in traditional credit markets. 

"Fixed-rate lending is fundamental to how global credit markets operate," Morpho CEO Paul Frambot said. "Without it, onchain markets remain incomplete."

How Midnight works

According to Morpho, the platform lets borrowers and lenders submit the terms they are willing to accept. A loan is then created when their offers match – this means the market determines the interest rate rather than a formula built into the protocol.

Each loan comes with a set end date and interest rate, so borrowers know how much they will owe and lenders know what they can expect to earn. Borrowers can also use different types of collateral, while lenders can offer their funds across several markets. 

The new platform will operate alongside Morpho's variable-rate lending protocol that allows users to create separate lending markets for different pairs of crypto assets.

Lending TVL drop

The move comes as most DeFi lending protocols have struggled, holding $40.67bn in total value locked (TVL) as of 21 Jul, down from $90.25bn on 8 Oct 2025, according to DeFiLlama. The steep decline tracks a broader market downturn that was initially sparked by President Donald Trump announcing tariffs on China on 10 Oct, 2025. 

This downturn continued into 2026 as crypto prices fell, users reduced their borrowing, and several protocols, including LayerZero and KelpDAO, suffered large exploits. 

The value of outstanding loans on DeFi platforms also fell for a second straight quarter in the first three months of 2026, dropping 13.8% to $28.22bn, according to a report by Galaxy Research. By 1 May, outstanding loans had fallen to $23.29bn, around 51% below their September 2025 record.

Morpho, however, has been a bright exception within DeFi, with $7.59bn in TVL - not far below its record of $8.53bn - with $11.58bn supplied and $3.98bn in active loans across 40 chains as of 21 Jul, according to DeFiLlama. The protocol accounts for nearly 19% of DeFi lending market, making it the second-largest lending protocol in value locked, behind only Aave.

Morpho's native token remains less than half its January 2025 all-time high of $4.17 but has gained about 78% year to date, sharply outperforming the broader crypto market. Total crypto market capitalization fell 23.8% over the same period, dropping to $2.24tn at 20:24UTC on 21 Jul from nearly $3tn in early January.

Morpho's recent moves

The Midnight Morpho launch follows several expansions to Morpho's network in recent months, expansions that have driven both TVL and Morpho's token price. 

Robinhood selected Morpho to provide the lending system behind its Earn product earlier in July. Meanwhile, Galaxy Digital recently launched a service that selects and manages Morpho lending vaults and makes them available through Fireblocks Earn.

Morpho also raised $175mn in June in a round co-led by Paradigm, a16z Crypto and Ribbit Capital. Fortune reported that the investment valued Morpho at as much as $2bn.

The protocol's team did not immediately respond to Sandmark's request for comment.