I am an avid user of Benqi (a loan market on Avalanche that is also based on Compound). The first thing I noticed when I looked at Flux is that the utilization rates of most of both USDT and USDC is at 100% and the utilization rate of DAI and FRAX is over 90%. This makes me really not want to loan any money out, as it tells me I might never be able to withdraw the money (and if I can, it will be tiny bits at a time), no matter how much juicy interest it might accumulate.
I’d thereby think that the borrower interest rates would/should be designed to heavily discourage high utilization specifically so that there is at least some liquidity for withdrawals (which then increases the utilization again, increasing the interest, causing more people returning money or getting liquidated). To this end, Benqi charges borrowers of USDC at 100% utilization a 37.42% APY. I remember seeing utilization once hit 100%… that didn’t last long ;P.
In practice, while “90% utilization (kink) → Overnight Benchmark Funding Rate (OBFR) - 50 bps” and “100% utilization → OBFR + 300bps” might sound like a lot to a rational trad-fi person (I’m assuming? I’m more knowledgeable about the crazy irrational de-fi community), I think we can see see from your current state that they clearly aren’t anywhere near high enough to make a decentralized hands-off loan protocol comfortable to just jump in and use.