Crypto-collateralized loans rose to a record $73.6 billion in the third quarter, marking the sector’s most leveraged quarter on record, but the composition of that leverage appears significantly healthier than during the 2021-22 cycle.
According to Galaxy Research, the sharp rise was overwhelmingly driven by on-chain lending, which now accounts for 66.9% of all crypto-collateralized debt, up from 48.6% at the previous peak four years ago.
DeFi lending alone surged 55% to an all-time high of $41 billion, supported by points-based user incentives and improved collateral types such as Pendle flagship tokens.
Centralized lenders also saw a rebound, with lending growing 37% to $24.4 billion, although the market remains a third smaller than its 2022 peak.
Survivors of the last cycle have largely abandoned unsecured lending in favor of fully collateralized models in their quest for institutional capital or a stock market listing. Tether remains the dominant CeFi lender, holding nearly 60% of tracked loans.
The quarter also saw a decisive shift within DeFi itself: lending apps now capture over 80% of the on-chain market and CDP-backed stablecoins decline to 16%. Deployments of new chains, including Aave and Fluid on Plasma, helped drive activity, with Plasma attracting more than $3 billion in loans within five weeks of launching.
It is worth noting that shortly after the end of the third quarter, a leverage-induced sell-off occurred resulting in liquidations worth over $19 billion, the largest single-day waterfall in the history of crypto futures.
Still, Galaxy’s report claims that the liquidation event did not reflect systemic credit weakness: most positions were mechanically de-risked when exchanges’ automatic deleveraging systems were activated.
Meanwhile, corporate digital asset treasury (DAT) strategies remain reliant on leverage, with more than $12 billion in outstanding debt tied to cryptocurrency acquiring companies. Total industry debt, including DAT issuance, reached a record $86.3 billion.
The data suggests that cryptocurrency leverage is rising again, but on a firmer and more transparent basis, with collateralized structures replacing the opaque, unbacked credit that fueled the last boom-bust cycle.
