Written by: Zack Pokorny, Galaxy
Translated by: AididiaoJP, Foresight News
Introduction
Leverage in the cryptocurrency market had regained an upward trend in the second quarter, after a decline in cryptocurrency-backed loans and the futures market during the first quarter. Following the market fluctuations of 'Liberation Day' in early April, optimism toward cryptocurrency was reignited, with asset prices rising also driving the expansion of leverage in the second quarter. Notably, on-chain cryptocurrency mortgage loans grew by 42% during this period, reaching a historical high of $26.5 billion.
Digital Asset Reserve Companies (DATCOs) remain a core topic in the second quarter. However, these companies rely excessively on non-debt strategies to drive asset purchases, resulting in their debt balances remaining unchanged compared to the previous quarter.
This article tracks the trends of cryptocurrency mortgages, publicly traded reserve companies, and leverage trends in the cryptocurrency futures market on DeFi and CeFi platforms, while also adding new participants to both CeFi and DeFi lending platforms and the futures market.
Key points
As of June 30, Galaxy Research tracked $17.78 billion in unpaid CeFi loans. This figure represents a quarter-over-quarter increase of 14.66% ($2.27 billion) and has grown by $10.59 billion (+147.5%) since the bear market low of Q4 2023 ($7.18 billion).
The unpaid loans in DeFi applications, measured in USD, rebounded strongly from the first quarter, increasing by $7.84 billion (+42.11%) to reach $26.47 billion, marking a historical high.
Digital Asset Reserve Companies (DATCOs) remain a core theme in the second quarter. The rise of Ethereum reserve companies from March to June became a notable trend in the DATCOs space, whereas such entities were not common in the early months of the year.
Since Bitcoin DATCOs have not issued new debt, the unpaid debt balance of reserve companies with traceable data has remained unchanged. Nonetheless, June 2028 remains a month to watch, as $3.65 billion in unpaid debt will mature.
Open interest in futures (including perpetual futures) saw significant growth in the second quarter. As of June 30, the total open interest in futures across major platforms reached $132.6 billion.
As of June 30, open interest in perpetual futures was $108.92 billion, an increase of $29.2 billion (+36.66%) compared to the end of the first quarter.
Cryptocurrency mortgage loans
The following displays the main participants in the CeFi and DeFi cryptocurrency lending market. As cryptocurrency asset prices plummeted and liquidity dried up, some large CeFi lending institutions, ranked by loan scale, collapsed in 2022 and 2023. These lending institutions are marked with red warning dots. Since the last Galaxy cryptocurrency leverage report was published, we have added 5 DeFi applications, 1 CeFi lending institution, and 1 type of collateralized debt position (CDP) stablecoin.
New DeFi applications include:
Fraxlend (Ethereum, Fraxtal, and Arbitrum)
Curve Llamalend (Ethereum, Arbitrum, Fraxtal, and OP Mainnet)
Lista (BSC)
Hyperlend (HyperEVM)
Venus (BSC, Ethereum, Unichain, Arbitrum, zkSync Era, Base, OP Mainnet, and opBNB)
Existing applications that expand chain coverage include:
Echelon (Echelon Chain)
Save (Eclipse)
Euler (Arbitrum)
Kamino (13 new markets)
Dolomite (Ethereum)
New collateralized debt positions (CDP) stablecoins include:
Felix (HyperEVM native)
New CeFi lending institutions include:
Figure Markets
Nexo
Cryptocurrency lending and credit market map
CeFi
The table below compares the CeFi cryptocurrency lending institutions analyzed in the market. Some companies provide multiple services to investors. For example, Coinbase primarily operates as an exchange but also offers credit to investors through off-chain cryptocurrency lending and collateral financing. However, the analysis only pertains to the scale of its cryptocurrency mortgage loans.
This is Figure Markets' first participation in this report. Figure is a leading player in the on-chain credit space, with $11.1 billion in private credit and home equity lines of credit (HELOCs). Additionally, the company offers Bitcoin-backed loan products, with relevant data included in the table below. Although Figure's Bitcoin loan products have been live since April 2024, the company has only recently begun incentivizing their use.
Nexo also participated in the report for the first time this quarter. The lending institution has been operating since 2018 and currently only serves non-US clients. The company recently announced plans to re-enter the US market.
Overview of CeFi cryptocurrency lending institutions
As of June 30, Galaxy Research tracked $17.78 billion in unpaid CeFi loans. This figure represents a quarter-over-quarter increase of 14.66% ($2.27 billion) and has grown by $10.59 billion (+147.5%) since the bear market low of Q4 2023 ($7.18 billion).
Galaxy Research believes that the growth in the CeFi lending space is primarily driven by the following factors:
The reflexive relationship between lending activity and price increases, where lending activity typically rises alongside price increases. This applies to both DeFi and CeFi lending.
Increased competition may begin to reflect in borrowing costs. More competition means better control over costs, allowing for larger-scale borrowing activity in the market at more attractive rates.
Reserve companies are beginning to finance through CeFi lending institutions, representing a significant new demand source.
Due to adjustments in loan issuance strategies, Ledn has fallen out of the top three in unpaid loan scale. In the second quarter, Ledn decided to fully focus on Bitcoin-backed loans, discontinuing yield products and Ethereum-related products. This decision led to Ledn's issuance of Bitcoin-backed loans hitting historic highs. However, due to the discontinuation of institutional loans (from the discontinued Bitcoin and Ethereum yield products), its overall loan scale decreased compared to the first quarter. It should be noted that by the end of the second quarter, Ledn reported that 100% of its loan scale was dollar-denominated, with 99% being Bitcoin-backed loans and 1% being legacy Ethereum-backed loans, which will be gradually phased out.
Tether, Nexo, and Galaxy are the top three lending institutions tracked by Galaxy Research based on unpaid loan value. As of June 30, Tether's unpaid loans amounted to $10.14 billion, Nexo $1.96 billion, and Galaxy $1.11 billion.
Quarterly statistics on the size of the CeFi cryptocurrency lending market
Tether dominates our analysis with a market share of 57.02%. Together with Nexo (11.01%) and Galaxy (6.23%), the top three CeFi lending institutions account for 74.26% of the market share.
When comparing market shares, it is essential to note the differences among CeFi lending institutions. Some lending institutions only offer specific types of loans (e.g., Bitcoin-collateralized products, altcoin-collateralized products, or cash loans excluding stablecoins), serve specific types of clients (e.g., institutional or retail), or operate solely in specific jurisdictions. The combination of these factors makes it easier for some lending institutions to scale up.
Quarterly statistics on the market share of the CeFi lending market
The table below details Galaxy Research's data sources for each CeFi lending institution and the logic behind calculating their loan scales. While DeFi and on-chain CeFi loan data can be obtained through transparent on-chain data, obtaining CeFi data is more complex. This is due to inconsistencies in how CeFi lending institutions account for unpaid loans, the frequency of information disclosure, and the difficulty of obtaining such information.
It is important to note that the values provided by third-party private lending institutions have not been formally reviewed by Galaxy Research.
Data sources and logic for cryptocurrency lending market size
CeFi vs. DeFi lending
The unpaid loans in DeFi applications, measured in USD, rebounded strongly from the first quarter, increasing by $7.84 billion (+42.11%) to reach $26.47 billion, marking a historical high. When combining DeFi applications with CeFi lending platforms, the total unpaid cryptocurrency mortgage loans at the end of the quarter amounted to $44.25 billion. This figure represents a $10.12 billion increase (+29.64%) from the previous quarter, primarily due to the growth of unpaid loans in DeFi lending platforms. Only Q4 2021 ($53.44 billion) and Q1 2022 ($48.39 billion) had higher unpaid loan scales than Q2 2025.
Note: There may be double counting between the total size of CeFi loans and DeFi borrowing. This is because some CeFi entities rely on DeFi applications to lend to off-chain clients. For example, suppose a CeFi lending institution uses its idle Bitcoin as collateral to borrow USDC on-chain, and then lends the USDC to off-chain borrowers. In this case, the on-chain borrowing by that CeFi lending institution will appear simultaneously in both DeFi unpaid loans and its financial statements (as unpaid loans to clients). Due to a lack of disclosure or on-chain attribution information, it is challenging to filter this out.
Quarterly statistics on the size of the CeFi + DeFi lending applications market (excluding CDP stablecoins)
Due to the quarter-over-quarter growth of unpaid loans in DeFi lending applications, their leading advantage over CeFi lending platforms has approached the historical high of Q4 2024 again. As of the end of Q2 2025, DeFi lending applications accounted for 59.83% of CeFi lending platforms, an increase from 54.56% in Q1 2025, but down from the peak of 61.99% in Q4 2024.
Quarterly statistics on the market share of CeFi + DeFi lending applications (excluding CDP stablecoins)
The cryptocurrency collateral portion of the third component, collateralized debt position (CDP) stablecoin supply, increased by $1.24 billion (+16.45%) quarter-over-quarter. Similarly, there may be double counting between the total size of CeFi loans and the supply of CDP stablecoins, as some CeFi entities may rely on minting CDP stablecoins through cryptocurrency collateral to provide loans to off-chain clients.
Overall, cryptocurrency mortgages grew by $11.43 billion (+27.44%) in Q2 2025, reaching $53.09 billion. Only Q4 2021 ($69.37 billion) and Q1 2022 ($63.43 billion) had higher cryptocurrency mortgage and CDP stablecoin balances than the current level.
Quarterly statistics on the size of the CeFi + DeFi lending market (including CDP stablecoins)
As of the end of Q1 2025, DeFi lending applications accounted for 49.86% of the cryptocurrency mortgage loan market (an increase of 515 basis points from Q1 2025), while CeFi platforms accounted for 33.48% (a decrease of 373 basis points) and the cryptocurrency collateral portion of CDP stablecoins accounted for 16.65% (a decrease of 142 basis points). When combining DeFi lending applications and CDP stablecoins, the market share of on-chain lending platforms is 66.52% (an increase of 373 basis points), down from the historical high of 66.86% at the end of Q4 2024.
Quarterly statistics on the market share of CeFi + DeFi lending applications (including CDP stablecoins)
Other perspectives on DeFi lending
DeFi borrowing continues to rise to historical highs, with activity on Ethereum dominating. The 'liquid leverage' program in collaboration with Ethena and the ongoing use of Pendle principal tokens (PTs) on Aave and Euler have played a significant role in the expansion of the on-chain lending market. With the support of the 'liquid leverage' program and Pendle PT tokens, users implement 'looping strategies' that allow them to profit from the arbitrage between the yield of collateralized assets and borrowing costs. This strategy is common with ETH and stETH (liquid staked ETH), where users gain leveraged exposure to the Ethereum staking annual yield (APY) through looping strategies.
Since the end of the quarter on June 30, the asset supply of DeFi lending applications has increased by $20.06 billion (+33.91%), reaching $79.22 billion. As of July 31, 2025, Ethereum accounted for 78.22% of the DeFi lending supply. During the same period, Solana's deposits totaled $4.3 billion, accounting for 5.43%.
Historical asset supply on lending applications
The trend of borrowing assets in DeFi lending applications is similar to that of supply. During the period from June 30 to July 31, DeFi lending applications added $6.2 billion (+33.94%) in borrowing. Ethereum saw the highest growth in both absolute and relative terms, with an increase of $8.48 billion, or +42.73%. During the same period, the borrowing growth rate for Ethereum Layer 2 ranked second, with the total borrowing increasing by $309.73 million (+24.71%).
Historical borrowing assets on lending applications
As of August 8, there were $5.79 billion worth of Ethena issued assets on Aave V3 Core, of which 55.88% were Pendle PT tokens. Additionally, the total for USDe (Ethena's synthetic dollar) and sUSDE (staked USDe, which earns yield from the underlying collateral of USDe) amounted to $2.45 billion.
Assets issued to Aave V3 Core from Ethena
On-chain vs. off-chain rates
The following compares the borrowing rates for stablecoins, BTC, and ETH in the on-chain lending market versus off-chain platforms.
Stablecoins
The weighted average stablecoin borrowing rate rose slightly from 4.7% on March 31 to 4.96% on July 31 (using a seven-day moving average of the weighted average stablecoin borrowing rates and CDP stablecoin minting fees). This slight increase was due to a minor uptick in borrowing activity, while the parameters of the stablecoin lending market remained nearly unchanged. Since mid-March 2025, the stablecoin rates on Aave (the largest liquidity hub for stablecoins) have remained unchanged.
Composite weighted stablecoin borrowing annual rate / stable fee (Ethereum mainnet)
The following lists the costs of borrowing stablecoins through lending applications and the costs of minting CDP stablecoins through cryptocurrency collateral. The trends in the two rates are similar, but the CDP stablecoin minting rates typically fluctuate less, as they are set manually at regular intervals and do not change in real time with the market.
Stablecoin borrowing annual rates on lending applications vs. CDP stablecoin stable fees (Ethereum mainnet)
Since early July, off-chain USDC rates have started to rise slightly, while the rates on on-chain lending applications have remained relatively flat. As of July 28, 2025, the rate spread between on-chain USDC rates and off-chain rates (on-chain rates minus off-chain rates) reached its highest level since December 30, 2024. Despite a continuous price increase throughout the quarter, the rates for on-chain and off-chain stablecoins remained stable.
USDC: Off-chain borrowing rates vs. weighted average on-chain borrowing rates
The chart below tracks the same rates for USDT. Since early July, the on-chain and off-chain rates for USDT have become closer than those for USDC.
USDT: Off-chain borrowing rates vs. weighted average on-chain borrowing rates
Bitcoin
The chart below shows the weighted borrowing rates for wrapped Bitcoin (WBTC) in lending applications across multiple applications and chains. On-chain WBTC borrowing costs are typically lower because wrapped Bitcoin is mainly used as collateral in on-chain markets, and borrowing demand is not high. Compared to stablecoins, on-chain BTC borrowing costs remain stable, as the frequency of borrowing and repayment is low.
Weighted WBTC borrowing rate (multi-chain aggregate)
The historical divergence in borrowing rates between on-chain and off-chain BTC persisted in the second quarter. In the off-chain market, the demand for BTC is mainly driven by two factors: 1) the demand for shorting BTC; 2) using BTC as collateral for stablecoin and cash loans. The former is a demand source that is not commonly found in the on-chain lending market, leading to differences in borrowing costs between on-chain and off-chain BTC.
In early April, as the market rebounded strongly from 'Liberation Day' lows, off-chain BTC rates rose slightly. However, as the market cooled at the end of July, rates reverted to the 2.25% level seen in early Q2.
BTC: Off-chain borrowing rates vs. weighted average on-chain borrowing rates
ETH and stETH
The chart below shows the weighted borrowing rates for ETH and stETH (staked ETH on the Lido protocol) across multiple applications and chains. Historically, the borrowing cost of ETH has been higher than that of stETH because users borrow ETH to implement looping strategies, gaining leveraged exposure to the Ethereum network's staking annual yield (using stETH as collateral). Therefore, the annual borrowing rate for ETH typically fluctuates around 30-50 basis points above the Ethereum network's staking annual yield. When borrowing costs exceed staking returns, this strategy becomes uneconomical, so the annual borrowing rate for ETH rarely stays above the staking rate for long. However, in July, the borrowing rate for ETH surged significantly due to a large withdrawal of ETH from Aave V3 Core. The following will discuss the implications of this event in detail.
Similar to WBTC, the borrowing costs for stETH are generally lower, as this asset is primarily used as collateral and has a relatively low utilization rate.
Weighted ETH and stETH borrowing rates (multi-chain aggregate)
By using liquid staking tokens (LSTs) or liquid re-staking tokens (LRTs) as collateral (which can generate yield), users can obtain ETH loans at lower (or even negative) net borrowing rates. This cost efficiency drives the implementation of looping strategies: users repeatedly use LSTs as collateral to borrow unstaked ETH, stake it, and then use the generated LSTs to borrow more ETH, thus amplifying their exposure to the ETH staking annual yield. This strategy is effective only when the borrowing cost of ETH is lower than the staking annual yield of stETH. Most of the time, users can successfully implement this strategy. However, during the period from July 15 to July 25, the amount of ETH withdrawn from Aave V3 Core approached 300,000, leading to a spike in ETH borrowing rates, rendering the looping strategy unprofitable (as shown in the chart, net rates remained above 0%).
Net borrowing rate for ETH using stETH as collateral
This event triggered a chain reaction in the Ethereum staking withdrawal queue, with users eager to close their looped positions, which required uncollateralizing ETH from Ethereum's Beacon Chain. At peak times, the ETH uncollateralization wait time approached 13 days, setting a historical high. This event on Aave indicates that, while uncommon, the DeFi market can have a significant impact on the operation of the blockchain itself.
Ethereum staking withdrawal queue wait time (in days)
ETH off-chain rates
Similar to Bitcoin, the cost of borrowing ETH through on-chain lending applications is significantly lower than off-chain. This is driven mainly by two factors: 1) Similar to BTC, off-chain shorting demand exists, which is not common on-chain; 2) The Ethereum staking annual yield provides a lower bound rate for off-chain borrowing, as providers have little incentive to deposit assets on off-chain platforms at rates below the staking annual yield, or to lend assets on off-chain platforms at rates below the staking annual yield. Thus, for ETH, the lower bound rate for off-chain lending is typically the staking annual yield, while the staking annual yield on-chain usually serves as the upper bound rate.
ETH: Off-chain borrowing rates vs. weighted average on-chain borrowing rates
Corporate debt strategy
Digital Asset Reserve Companies (DATCOs) remain a core theme in the second quarter. The rise of Ethereum reserve companies from March to June became a notable trend in the DATCOs space, whereas such entities were not common in the early months of the year. A key distinction between some Bitcoin reserve companies and Ethereum reserve companies is that Bitcoin reserve companies utilize debt financing to purchase assets. In contrast, the large Ethereum reserve companies that launched over the past few months rely entirely on public equity private investment (PIPEs), private placements, market issuances (ATMs), and sales of other assets (e.g., selling BTC to purchase ETH) for financing. Consequently, since Bitcoin DATCOs have not issued new debt, the unpaid debt balance of traceable data reserve companies has remained unchanged at $12.74 billion (including GameStop).
Unpaid debt known to be issued by Bitcoin reserve companies for purchasing BTC
Due to the lack of new debt issuance, the scale and maturity of DATCOs' debt remain consistent. Nonetheless, June 2028 remains a month to watch, as $3.65 billion in unpaid debt will mature. There are currently 16 months until the first batch of debt matures (December 2026).
The earliest maturity, redemption, or resale dates of the debt used by Bitcoin reserve companies to purchase Bitcoin (nominal amount)
Similar to the maturity schedule, the interest paid by DATCOs issuing interest-bearing debt each quarter has remained consistent with the previous quarter. Strategy (formerly MicroStrategy) has the highest quarterly interest expense, at $17.5 million.
The actual interest expenses of Bitcoin reserve companies each quarter
Futures market
Open interest in futures (including perpetual futures) saw significant growth in the second quarter. As of June 30, the total open interest in futures across major platforms reached $132.6 billion, an increase of $36.14 billion (+37.47%) compared to the end of Q1 on March 31. During the same period, Bitcoin futures open interest grew by $16.85 billion (+34.92%), Ethereum futures open interest grew by $10.54 billion (+58.65%), Solana futures open interest grew by $1.97 billion (+42.82%), and other cryptocurrency futures open interest grew by 38.52%. It is important to note that the total open interest does not completely represent the absolute amount of leverage, as some open interest may be hedged by spot long positions, thereby keeping traders' Delta exposure neutral to the underlying asset.
Since the previous quarter, we have added the following futures platforms:
BingX
Bitunix
CoinEx
Coinbase
Gate
KuCoin
MEXC
dYdX
Open interest in the futures market
As of June 30, the share of open interest in CME (including perpetual and non-perpetual contracts) was 15.48%, an increase of 149 basis points from 13.99% on March 31, but down 58 basis points from January 1. The open interest share of this Chicago exchange peaked at 19.08% on February 21, subsequently declining by 360 basis points.
As of June 30, CME's share of Ethereum open interest (calculated as CME Ethereum open interest divided by total market open interest) was 10.77%. This represents an increase of 218 basis points from the end of Q1 2025, but a decrease of 118 basis points from January 1, 2025. Similarly, CME's share of Bitcoin open interest increased by 380 basis points to 26.32% in Q2, down 152 basis points from the beginning of the year.
CME futures open interest share
Perpetual futures
As of June 30, open interest in perpetual futures was $108.92 billion, an increase of $29.2 billion (+36.66%) compared to the end of the first quarter. Open interest in perpetual futures is down 14.18% from the historical high of $126.7 billion on June 10. As of June 30, the market share of Bitcoin perpetual futures was 41.77%, Ethereum 23.13%, Solana 5.88%, and other assets 29.23%.
Open interest in perpetual futures by asset
As of June 30, the share of open interest in perpetual futures was 82.02%, down 231 basis points from the end of the first quarter.
Open interest share in perpetual futures
By open interest, Binance holds the largest share in the perpetual futures market at 20.83%. It is followed by Bybit (15.41%) and Gate (12.85%). As of the end of Q2, Hyperliquid's open interest totaled $7.516 billion, accounting for 6.91% of the total perpetual futures market.
Open interest in perpetual futures by platform
Conclusion
Leverage in the system continues to expand to new highs, with on-chain borrowing reaching historical highs and overall cryptocurrency mortgages achieving multi-year peaks. Factors driving this growth include: the reflexive relationship between lending activity and rising prices; reserve companies leveraging up to become a significant new demand source; and the expansion of new capital-efficient collateral in DeFi. This trend is also reflected in the futures market, where open interest has seen substantial growth.
Looking ahead, the ongoing collaboration among DeFi participants and the optimization of new collateral types suggest that the DeFi lending market is likely to continue growing in the coming quarters. Meanwhile, CeFi lending also benefits from the optimism driven by reserve companies and the overall market.