Change of the Investor Product?

I do not believe that adding another option would help it... people on the higher above market rate would never get matched, so soon everyone would be back to fast matching priority. To be honest, I would rather there was a single, fixed, no longer dropping rate. Though it should above AC 30DAA account given there will still be some lag in matching. 

I asked on LC whether they were intending to do something to allow rates to increase and got the response:

"We will be implementing a significant change to the lender product in December to combat the declining rates."

and told that they'll be making further announcements in the next couple of weeks.

Apologies if I'm missing something in your comment, but the issue on Growth Street isn't just that rates have decreased due to lender oversupply, it's that the mechanics of the investment product on Growth Street mean that once the interest has reduced (for whatever reason), there is no way for it to increase again.

On most platforms rates might decrease because of an increased investor demand, but should demand subside the interest rates might subsequently increase. This is presumably the "free market" model you mention, but that isn't what we have here. Because of the "ratchet" like system on Growth Street, once rates go down, they're locked to the new level and below. I'm not saying that Growth street should artificially inflate interest rates, but they should have a mechanism that allows the possibility for rates to increase, rather than the current system that forces rates down at an ever increasing rate.

There is a fundamental difference here between models whereby the rates are free to move depending on demand (ratesetter), fixed at one value (AC) and driven downwards at an ever faster rate, with no possibility of a rise. The fact that demand is so much higher than supply on GS may well mean that rates would continue to go down, but in this scenario you would expect the speed with which the rates fall to be decreasing as more lenders pull out. That isn't happening here - the rates are falling faster and faster as documented on another thread. This appears to be down to a fundamental problem with the way the current rate is calculated.

Again, I'm not saying that GS should necessarily intervene to artificially prop up interest rates, but it seems bizarre that you have this model that means rates are dropping every two weeks or so on average and that there is mechanically no way rates could ever rise.

Finally, I'd just point out that the comparison to the Ratesetter rolling market seems very apt - they're fairly comparable products. Had this model been applied to Ratesetter then since June 2016 we'd be looking at rates of below ~2.1%. This isn't what's happened, and the rolling rate is currently above 4%. That's a pretty clear example of rates increasing in this part of the P2P market.

My XIRR for GS is 5.33% over the last 8 months, I am content with 5% for 30 day money.

I think there is another model - Lending Works - where the platform can increase the market rate, rather than the lender. They adjust (up or down) weekly.  PErhaps that is how GS was/is intending to adjust once there is more balance between lenders/borrowers in the market?