Crypto Borrowing Breaks All-Time High, but With Stronger Collateral This Time

Crypto borrowing reached a record high of $73.6 billion in the third quarter of 2025, marking the most leveraged quarter in the sector's history. This significant increase in crypto-collateralized debt, primarily driven by onchain lending, indicates a healthier leverage composition compared to previous cycles. Onchain lending comprised 66.9% of all crypto collateralized borrowing, up from 48.6% at the last peak. DeFi lending alone surged 55% to hit an all-time high of $41 billion due to new collateral types and user incentives. Meanwhile, centralized lending grew by 37% to $24.4 billion with Tether controlling nearly 60% of these loans. A massive liquidation event of $19 billion occurred shortly after Q3, but reports claim it stemmed from exchange risk systems rather than systemic credit concerns. Overall, the findings suggest a robust rise in leverage underpinned by more secure collateral structures, differing from the uncollateralized lending that characterized past market cycles.

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