Crypto-Collateralized Borrowing Hits Record $73.6B in Q3 as Leverage Becomes Healthier, Galaxy Reports

Crypto-collateralized debt surged to a record $73.6 billion in the third quarter, marking the sector’s most leveraged period on record. Yet, according to Galaxy Research, the composition of that leverage is considerably healthier than during the 2021–22 cycle.

The growth was driven primarily by onchain lending, which now accounts for 66.9% of all crypto-collateralized borrowing, up from 48.6% at the previous peak four years ago. DeFi lending alone jumped 55% to a record $41 billion, buoyed by incentive programs and more robust collateral types such as Pendle Principal Tokens.

Centralized lenders also saw a rebound, with borrowing rising 37% to $24.4 billion, though the sector remains roughly a third smaller than its 2022 peak. Survivors of the previous cycle have largely abandoned uncollateralized lending in favor of fully collateralized models to attract institutional capital or pursue public listings. Tether continues to dominate CeFi lending, holding nearly 60% of tracked loans.

Within DeFi, lending applications now capture more than 80% of the onchain market, while CDP-backed stablecoins have shrunk to 16%. New deployments on chains such as Aave and Fluid on Plasma drove activity, with Plasma attracting over $3 billion in borrows within just five weeks of launch.

Shortly after Q3 ended, a leverage-driven liquidation event wiped out more than $19 billion in a single day—the largest in crypto futures history. Galaxy notes that the event did not reflect systemic credit weakness, as most positions were mechanically de-risked through exchanges’ auto-deleveraging protocols.

Corporate digital-asset treasury (DAT) strategies also continue to employ leverage, with more than $12 billion in outstanding debt tied to crypto-acquiring firms. Including DAT issuance, total industry debt reached a record $86.3 billion.

Overall, Galaxy’s report indicates that while crypto leverage is rising, it now sits on firmer and more transparent foundations. Collateralized structures are increasingly replacing the opaque, unbacked credit that fueled the last boom-and-bust cycle.