How to earn by borrowing: Morpho vs AAVE Strategy breakdown for cbETH holders
DeFi Income simplified.
In DeFi, we’re always chasing alpha — but what if I told you that you could earn yield simply by borrowing money? That’s exactly what’s happening right now on Morpho Blue, where negative interest rate opportunities are creating a rare arbitrage window for cbETH holders.
My indulgence with morpho started when I read “The Price of Trust” which they published two days ago by morpho. the initial quotes got me deepening in their strategy of rewarding debt:
At its core, a loan is a promise of repayment. The critical question is how to evaluate the trust assumptions underlying that promise—whether it is collateral, reputation, or legal contracts.
In this article, we’ll break down a real-world scenario comparing Morpho and AAVE, two of the top lending protocols in DeFi. We’ll walk through a clear strategy for using $10,000 worth of cbETH as collateral and explore the returns (and risks) of each protocol.
The opportunity: Negative Borrow Rates on Morpho
Currently, Morpho Blue offers a unique position where you can:
Supply cbETH (a liquid staked ETH token that earns ~4% APR), and
Borrow EURC (a Euro-backed stablecoin) at –2.78% APR.
Yes, you read that right: You get paid to borrow. This creates a dual-yield opportunity — one from staking rewards and another from the act of borrowing itself.
The setup: $10,000 Capital strategy
Let’s assume you deposit $10,000 worth of cbETH into either platform. You borrow at a 60% Loan-to-Value (LTV), which means you take a $6,000 EURC loan.
Here’s how the numbers play out over one year.
Option 1: AAVE strategy breakdown
cbETH staking yield (4%): +$400
Borrowing cost on EURC (3%): –$180
Net base profit: $220
If you’re more active and farm the borrowed EURC at 5% APR (say via Curve, Convex, or Pendle):
EURC farming yield (5%): +$300
Total potential profit: $520
Option 2: Morpho strategy breakdown
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cbETH staking yield (4%): +$400
Negative borrow interest on EURC (–2.78%): +$167 (you repay ~$5,833 on the $6,000 loan)
Net base profit: $567
With EURC farming:
EURC farming yield (5%): +$300
Total potential profit: $867
The verdict: Morpho Outperforms AAVE — For Now
Aave:
Base Yield (cbETH + Borrow) =$220
With EURC Farming =$520
Morpho:
Base Yield (cbETH + Borrow) = $567
With EURC Farming = $867
Morpho outperforms AAVE by $347–$647 annually on the same capital base, depending on how active you are with farming your borrowed assets. This is primarily due to the rare negative interest borrowing conditions.
Risks and considerations
While the strategy looks juicy, it's not without risks:
Liquidation Risk: cbETH price could drop. Stay below 70% LTV to stay safe.
Interest Rate Reversal: Morpho's negative borrow rates aren’t guaranteed long-term.
Smart Contract Risk: Morpho is newer and may not be as battle-tested as AAVE.
cbETH Peg Risk: Although generally stable, it's not immune to depegging under stress.
Who should use this Strategy?
Passive Investor? Just use Morpho, borrow EURC, and let the negative rate work for you.
Active Farmer? Layer in EURC yield farms to boost returns.
Risk-Averse User? AAVE remains the safer, more stable protocol with deeper liquidity.
In this unique moment, Morpho offers DeFi investors a chance to turn borrowing into a yield-generating activity, flipping the traditional model on its head. If you're holding cbETH and looking for low-effort, high-reward strategies, this is one of the cleanest plays on the board right now.
As always, manage your LTV carefully, monitor interest rate shifts, and farm responsibly.