According to Galaxy Research, in the third quarter, the volume of crypto-backed debt reached a record $73.6 billion. This is an all-time high, but now such debt is better collateralized than during the overheated market of 2021–2022.
Analysts noted that the main growth came from on-chain lending. It now accounts for almost 67% of all crypto-collateralized debt. Four years ago, this figure was 48.6%. Now it is driven by CDP platforms, stablecoins like DAI and decentralized lending services.
Borrowers are moving away from unsecured loans and switching to full collateralization
According to Galaxy Research, the volume of loans in DeFi grew by 55%, reaching a record $41 billion. This growth was driven by incentive schemes with point accrual, as well as new forms of collateral, such as Pendle Principal tokens.
Centralized platforms added 37%, to $24.4 billion. But despite this, the volume of centralized loans is still a third below the peak values of 2022.
Researchers note that participants from the previous cycle have almost completely abandoned unsecured loans, switching to fully collateralized models. According to Galaxy Research, many platforms choose this strategy to attract institutional capital or prepare for an IPO.
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On-chain data shows that Tether remains the leader among CeFi lenders. It accounts for about 60% of all tracked loans. At the same time, the quarter was the most successful for the USDT issuer: the loan portfolio grew by almost $630 million.
In DeFi there was also a noticeable shift: in the third quarter, more than 80% of the on-chain market was in lending applications. The share of stablecoins collateralized through CDP, meanwhile, dropped to 16%.
“We see a clear move away from synthetic crypto-collateralized stablecoins towards loans in centralized stablecoins like USDT and USDC,” explained Zach Pokorny, analyst at Galaxy Research.
Activity was also driven by the launch of new projects, including Aave and Fluid on Plasma. Galaxy noted that Plasma attracted over $3 billion in loans in its first five weeks.
According to on-chain data, shortly after the end of the quarter there was a major crash caused by excessive leverage. Positions worth more than $19 billion were liquidated. The crash on October 10 was the largest one-day drop in the history of crypto futures.
Most liquidations were recorded on Hyperliquid: $10.08 billion in a day. On Bybit and Binance , $4.58 billion and $2.31 billion were liquidated, respectively.
Nevertheless, Galaxy emphasizes that the mass liquidation does not signal systemic problems in the lending segment. Most positions were automatically unwound by built-in exchange mechanisms.
Corporate DAT strategies still use borrowed funds
Galaxy Research also reported that corporate digital asset management strategies (DAT) still actively use leverage. According to analysts, the total outstanding debt of companies working with cryptocurrencies exceeds $12 billion.
Taking into account DAT issuances, the total industry debt reached a new high of $86.3 billion. At the same time, the debt volume changed little for most of the year. Over the past quarter, it grew by only $422 million.
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Galaxy also reported quarterly growth in open interest in futures by 41.46%. The figure increased from $132.75 billion to $187.79 billion by September 30. By October 6, the figure reached a historic high of $220.37 billion. However, the crash on October 10 dropped OI by 30% in a day, from $207.62 billion to $146.06 billion.
According to Galaxy, at the end of September, the volume of active borrowing in CeFi was $24.37 billion. Over the quarter, the figure grew by $6.6 billion (or 37.11%), and since the bear market low (Q4 2023), by $17.19 billion (+239.4%).
