Crypto leverage has returned to record levels, but the structure of that leverage looks markedly different from the excesses that triggered the 2021–22 credit crisis, according to Galaxy Research’s Q3 report.
The firm argued that the expansion, now at an all-time high of $73.59 billion in collateralized borrowing, is being driven primarily by fully collateralized onchain lending rather than opaque, unbacked CeFi credit.
Galaxy’s data shows crypto-collateralized lending grew 38.5% in the third quarter, surpassing its previous peak from late 2021. But the underlying composition has shifted: 66.9% of all crypto borrowing now takes place onchain, up from 48.6% at the last cycle peak.
DeFi lending applications alone account for 80% of all onchain activity, with collateralized debt positions making up the balance.
The transition marks a clear break from the prior leverage cycle, when uncollateralized loans, relationship-based credit, and speculative yield-chasing defined market behavior.
In contrast, Galaxy stated that the surviving CeFi lenders have adopted internal risk controls, moved toward full collateralization, and are preparing for more institutional scrutiny, including potential public listings.
“Uncollateralized lending is now a reputational and commercial liability,” the report noted. Collateral quality has also changed.
Borrowing is increasingly backed by BTC, ETH, and yield-bearing assets such as Pendle PTs rather than volatile long-tail tokens.
Galaxy suggested the current leverage buildup is less fragile because it relies on transparent collateral rather than unsecured credit. The report highlights a major stress event that followed quarter-end: the Oct. 10 liquidation cascade, the largest forced unwind in crypto futures history.
More than $19 billion in long and short positions were liquidated in a single day. However, the firm noted that this episode did not reflect systemic credit stress. Instead, sharp price moves triggered mechanical exchange-level deleveraging, sweeping up even modestly levered accounts.
“The perps market got cleaned out,” the report stated, but without the insolvencies that defined 2022. Still, leverage remains embedded across market structure.
Futures open interest hit an all-time high of $220.37 billion on Oct. 6 before dropping 30% during the liquidation event.
Perpetual futures remain the dominant driver of derivatives leverage, accounting for more than three-quarters of total OI. CeFi lenders also posted their strongest quarter since before the crisis.
Tether, Nexo and Galaxy remain the largest tracked lenders, with Tether expanding its loan book by $4.47 billion to $14.6 billion. Overall CeFi borrows grew 37.1% to $24.37 billion, though still far below their 2022 peak.
DeFi lending growth continues to outpace CeFi. Outstanding loans on DeFi protocols rose 54.8% to $40.99 billion in Q3, setting another all-time high.
A notable driver has been the emergence of collateral assets that allow users to loop stablecoin strategies at efficient loan-to-value ratios.
New chains such as Plasma have also accelerated lending activity, with more than $3 billion of outstanding borrows within five weeks of launch.
Corporate crypto-backed debt also reached a record $86.26 billion, with digital asset treasury companies holding more than $12 billion in outstanding debt.
MicroStrategy remains the largest of these issuers, with $8.21 billion in debt tied to its Bitcoin strategy.
Galaxy stated that the system is not risk-free and liquidations and leverage reflexivity remain structural features, but emphasized that the foundation of today’s borrowing is far more transparent and conservative than the last cycle.
“Leverage is expanding again,” the report says, “but under tighter collateral standards and clearer separation between credit and speculation.”
