Written by: Zack Pokorny, Galaxy
Compiled by: AididiaoJP, Foresight News
Introduction
The leverage in the cryptocurrency market has resumed its upward trend in the second quarter, following a decline in both cryptocurrency-backed loans and the futures market in the first quarter. After the market volatility on 'Liberation Day' in early April, optimism towards cryptocurrencies was reignited, and rising asset prices also drove the expansion of leverage in the second quarter. Notably, on-chain cryptocurrency collateralized loans grew by 42% during this period, reaching a historical high of $26.5 billion.
Digital asset reserve companies (DATCOs) continue to be a core topic in the second quarter. However, these companies are overly reliant on non-debt strategies to drive asset purchases, resulting in their debt balances remaining unchanged from the previous quarter.
This article tracks trends in cryptocurrency collateralized loans, publicly traded reserve companies, and leverage in the cryptocurrency futures market on both DeFi and CeFi platforms, while also adding new participants in the lending platforms for CeFi and DeFi, as well as the futures market.
Key Points
As of June 30, Galaxy Research tracked $17.78 billion in outstanding CeFi loans. This figure represents a quarter-on-quarter increase of 14.66% ($2.27 billion), and has grown by $10.59 billion (+147.5%) since the bear market low of $7.18 billion in Q4 2023.
The dollar-valued outstanding loans in DeFi applications rebounded strongly from the first quarter, increasing by $7.84 billion (+42.11%) to reach $26.47 billion, setting a new historical high.
Digital asset reserve companies (DATCOs) remained a core theme in the second quarter. From March to June, the rise of Ethereum reserve companies became a notable trend in the DATCOs space, whereas such entities were not common in the early months of the year.
Due to the lack of new debt issuance by Bitcoin DATCOs, the outstanding debt balance of traceable reserve companies remains unchanged. Nevertheless, June 2028 remains a month to watch, as $3.65 billion in outstanding debt will mature then.
The open interest in futures (including perpetual futures) experienced significant growth in the second quarter. As of June 30, the total open interest in futures amounted to $132.6 billion.
As of June 30, the open interest in perpetual futures was $108.922 billion, an increase of $29.2 billion (+36.66%) from the end of the first quarter.
Cryptocurrency collateralized loans
The following displays the main participants in the CeFi and DeFi cryptocurrency lending markets. With the significant drop in cryptocurrency asset prices and liquidity exhaustion, some large CeFi lending institutions based on loan volume collapsed in 2022 and 2023. These lending institutions are marked with red warning points. Since the release of Galaxy's previous cryptocurrency leverage report, we have added 5 DeFi applications, 1 CeFi lending institution, and 1 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)
The newly added collateralized debt position (CDP) stablecoins include:
Felix (HyperEVM native)
New CeFi lending institutions include:
Figure Markets
Nexo
Map of cryptocurrency lending and credit markets
CeFi
The table below compares CeFi cryptocurrency lending institutions in market analysis. Some companies offer various services to investors. For example, Coinbase primarily operates as an exchange but also provides credit to investors through over-the-counter cryptocurrency loans and margin financing. However, the analysis only covers the scale of its cryptocurrency collateralized loans.
This is the first time Figure Markets has participated in this report. Figure is a top 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, which have been included in the table below. Although Figure's Bitcoin loan products have been available since April 2024, the company only recently began incentivizing their use.
Nexo also participated in this quarter's report for the first time. This lending institution has been operating since 2018 and currently serves only non-U.S. clients. The company recently announced plans to re-enter the U.S. market.
Overview of CeFi cryptocurrency lending institutions
As of June 30, Galaxy Research tracked $17.78 billion in outstanding CeFi loans. This figure represents a quarter-on-quarter increase of 14.66% ($2.27 billion), and has grown by $10.59 billion (+147.5%) since the bear market low of $7.18 billion in Q4 2023.
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 borrowing activity typically increases with rising prices. This applies to both DeFi and CeFi lending.
Increased competition may begin to reflect in borrowing costs. More competition means better cost control, leading to larger-scale lending activities at more attractive rates in the market.
Reserve companies have started financing through CeFi lending institutions, representing a significant new source of demand.
Due to adjustments in loan issuance strategies, Ledn has fallen out of the top three in outstanding loan volume. 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 Bitcoin-backed loan issuance reaching an all-time high. However, due to the cancellation of institutional loans (from discontinued Bitcoin and Ethereum yield products), its overall loan volume decreased compared to the first quarter. It should be noted that by the end of the second quarter, 100% of the loan volume reported by Ledn was dollar-denominated loans, with 99% being Bitcoin-backed loans and 1% being legacy Ethereum-backed loans, which will gradually phase out.
Tether, Nexo, and Galaxy are the top three lending institutions tracked by Galaxy Research in terms of outstanding loan value. As of June 30, Tether had outstanding loans of $10.14 billion, Nexo $1.96 billion, and Galaxy $1.11 billion.
Tether dominates our analysis with a market share of 57.02%. Combined 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 important to note the differences between CeFi lending institutions. Some lending institutions only offer specific types of loans (e.g., only support Bitcoin collateral, altcoin collateral products, or cash loans excluding stablecoins), serve only specific types of clients (e.g., institutional or retail), or operate only in specific jurisdictions. The combination of these factors makes it easier for some lending institutions to scale up.
Quarter-end statistics of CeFi lending market share
The table below details Galaxy Research’s data sources and the logic for calculating the loan volume for each CeFi lending institution. Although DeFi and on-chain CeFi lending data can be obtained through transparent on-chain data, accessing CeFi data is more complex. This is due to inconsistencies in how CeFi lending institutions account for outstanding 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 verified by Galaxy Research.
Data sources and logic for cryptocurrency lending market size
CeFi vs. DeFi lending
The dollar-valued outstanding loans in DeFi applications rebounded strongly from the first quarter, increasing by $7.84 billion (+42.11%) to reach $26.47 billion, setting a new historical high. When combining DeFi applications with CeFi lending platforms, the total outstanding cryptocurrency collateralized loans at the end of the quarter amounted to $44.25 billion. This figure represents an increase of $10.12 billion (+29.64%) from the previous quarter, primarily due to the increase in outstanding loans on DeFi lending platforms. Only in the fourth quarter of 2021 ($53.44 billion) and the first quarter of 2022 ($48.39 billion) was the outstanding loan volume higher than in the second quarter of 2025.
Note: There may be double counting between the total CeFi loan volume and DeFi borrowing. This is because some CeFi entities rely on DeFi applications to lend to off-chain clients. For example, assume a CeFi lending institution uses its idle Bitcoin collateral to borrow USDC on-chain, and then lends the USDC to off-chain borrowers. In this case, the CeFi lending institution's on-chain borrowing will simultaneously appear in DeFi outstanding loans and its financial statements (as outstanding loans to customers). Due to the lack of disclosure or on-chain attribution information, it is challenging to filter this out.
Quarter-end statistics of CeFi + DeFi lending application market size (excluding CDP stablecoins)
Due to the quarter-on-quarter growth of outstanding loans in DeFi lending applications, their leading advantage over CeFi lending platforms is once again approaching the historical peak reached in the fourth quarter of 2024. As of the end of the second quarter of 2025, DeFi lending applications accounted for 59.83% of CeFi lending platforms, up from 54.56% in the first quarter of 2025, but down 216 basis points from the peak of 61.99% in the fourth quarter of 2024.
Quarter-end statistics of CeFi + DeFi lending application market share (excluding CDP stablecoins)
The portion of cryptocurrency collateral in the third component, collateralized debt positions (CDP) stablecoin supply, increased by $1.24 billion (+16.45%) quarter-on-quarter. Similarly, there may be double counting between the total CeFi loan volume and CDP stablecoin supply, as some CeFi entities may rely on minting CDP stablecoins to provide loans to off-chain clients.
Overall, in the second quarter of 2025, cryptocurrency collateralized loans grew by $11.43 billion (+27.44%), reaching $53.09 billion. Only in the fourth quarter of 2021 ($69.37 billion) and the first quarter of 2022 ($63.43 billion) was the volume of cryptocurrency collateralized loans and CDP stablecoin balances higher than the current level.
Quarterly statistics of CeFi + DeFi lending market size (including CDP stablecoins)
As of the end of the first quarter of 2025, DeFi lending applications accounted for 49.86% of the cryptocurrency collateralized 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 peak of 66.86% at the end of Q4 2024.
Quarter-end statistics of CeFi + DeFi lending application market share (including CDP stablecoins)
Other perspectives on DeFi lending
DeFi borrowing continues to rise to historical highs, with Ethereum activity dominating. The 'liquid leverage' program in collaboration with Aave by Ethena, along with the continued use of Pendle principal tokens (PTs) on Aave and Euler, has played a significant role in the expansion of the on-chain lending market. Supported by 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 in ETH and stETH (liquid-staked ETH), allowing users to gain leveraged exposure to the Ethereum staking annual yield (APY) through looping strategies.
Since the end of the second quarter on June 30, the asset supply in 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 amounted to $4.3 billion, accounting for 5.43%.
Historical asset supply on lending applications
The borrowing asset trends in DeFi lending applications are similar to supply trends. From June 30 to July 31, borrowing in DeFi lending applications increased by $6.2 billion (+33.94%). Ethereum saw the largest increase in absolute and relative terms, with $8.48 billion in new borrowing, a growth rate of +42.73%. During the same period, borrowing growth in Ethereum Layer 2 ranked second, with a total increase of $309.73 million (+24.71%).
Historical borrowing assets on lending applications
As of August 8, Aave V3 Core has assets worth $5.79 billion issued by Ethena, of which 55.88% are Pendle PT tokens. Additionally, the total for USDe (Ethena's synthetic dollar) and sUSDE (staked USDe, whose yield comes from the underlying collateral of USDe) is $2.45 billion.
Assets issued by Ethena supplied to Aave V3 Core
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 has slightly risen from 4.7% on March 31 to 4.96% on July 31 (using the seven-day moving average of the weighted average stablecoin borrowing rate and CDP stablecoin minting fees). This slight increase is due to a slight uptick in borrowing activity, while the parameters of the stablecoin lending market have seen minimal adjustments. Since mid-March 2025, the stablecoin rates at Aave (the largest liquidity center for stablecoins) have remained unchanged.
Weighted average stablecoin borrowing annual rate / stability fee (Ethereum mainnet)
The following lists the costs of borrowing stablecoins through lending applications and minting CDP stablecoins through cryptocurrency collateral. The trends in both rates are similar, but the CDP stablecoin minting rates typically exhibit less volatility, as they are manually set periodically and do not fluctuate in real-time with the market.
Stablecoin borrowing annual rates on lending applications vs. CDP stablecoin stability fees (Ethereum mainnet)
Since the beginning of July, off-chain USDC rates have started to rise slightly, while the rates for on-chain lending applications have remained relatively stable. As of July 28, 2025, the 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 the continuous rise in prices throughout the quarter, both on-chain and off-chain stablecoin rates remained stable.
USDC: Off-chain borrowing rate vs. weighted average on-chain borrowing rate
The following chart tracks the same rates for USDT. Since the beginning of July, the on-chain and off-chain rates for USDT have been closer to those for USDC.
USDT: Off-chain borrowing rate vs. weighted average on-chain borrowing rate
Bitcoin
The following chart shows the weighted borrowing rates for wrapped Bitcoin (WBTC) in lending applications across multiple applications and chains. The borrowing cost for on-chain WBTC is typically lower because wrapped Bitcoin is primarily used as collateral in on-chain markets, where the borrowing demand is low. Compared to stablecoins, the borrowing cost for on-chain BTC remains stable due to the lower frequency of borrowing and repayment.
Weighted borrowing rates for WBTC (multi-chain summary)
The historical divergence between on-chain and off-chain BTC borrowing rates continued in the second quarter. In the off-chain market, demand for BTC is primarily 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 not commonly seen 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 the 'Liberation Day' lows, off-chain BTC rates saw a slight increase. However, as the market cooled at the end of July, rates fell back to 2.25% levels seen at the beginning of the second quarter.
BTC: Off-chain borrowing rate vs. weighted average on-chain borrowing rate
ETH and stETH
The following chart shows the weighted borrowing rates for ETH and stETH (staked ETH on the Lido protocol) across multiple applications and chains. Historically, the borrowing cost for ETH has been higher than that for stETH because users borrow ETH to implement looping strategies, thereby gaining leveraged exposure to the staking annual yield of the Ethereum network (using stETH as collateral). Therefore, the borrowing annual rate for ETH usually fluctuates 30-50 basis points around the staking annual yield of the Ethereum network. When borrowing costs exceed staking returns, this strategy becomes uneconomical, so the borrowing annual rate for ETH rarely stays higher than the staking rate for long. However, in July, the borrowing rate for ETH surged significantly due to the large volume of ETH withdrawals on Aave V3 Core. The following text will discuss the impact of this event in detail.
Similar to WBTC, the borrowing cost for stETH is generally lower because this asset is primarily used as collateral and has a relatively low utilization rate.
Weighted ETH and stETH borrowing rates (multi-chain summary)
By using liquid staking tokens (LSTs) or liquid re-staking tokens (LRTs) as collateral (these tokens can generate yields), 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, thereby amplifying their exposure to the ETH staking annual yield. This strategy is only effective when the borrowing cost for ETH is lower than the staking annual yield for stETH. In most cases, users can successfully implement this strategy. However, during the period from July 15 to July 25, the amount of ETH withdrawn on Aave V3 Core approached 300,000, leading to a surge in ETH borrowing rates, making the looping strategy unprofitable (the net rate in the following chart remains above 0%).
Net borrowing rate for ETH using stETH as collateral
This event caused a chain reaction in the Ethereum staking withdrawal queue, with users rushing to close their looping positions, which required unstaking ETH from Ethereum's Beacon Chain. At its peak, the waiting time for ETH unstaking approached 13 days, setting a historical high. This event on Aave indicates that, although rare, the DeFi market can have a significant impact on the operation of the blockchain itself.
Ethereum staking withdrawal queue waiting 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 primarily driven by two factors: 1) Similar to BTC, there is short-selling demand off-chain, which is not common on-chain; 2) The staking annual yield for Ethereum provides a floor rate for off-chain borrowing since providers have little incentive to deposit assets at rates lower than the staking annual yield, or for off-chain platforms to lend assets at rates lower than the staking annual yield. Therefore, for ETH, the floor borrowing rate off-chain is typically the staking annual yield, while the staking annual yield on-chain is usually the upper limit rate.
ETH: Off-chain borrowing rate vs. weighted average on-chain borrowing rate
Corporate debt strategy
Digital asset reserve companies (DATCOs) remained a core theme in the second quarter. From March to June, the rise of Ethereum reserve companies became a notable trend in the DATCOs space, whereas such entities were not common in the early months of the year. A key difference 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 in recent months rely entirely on public equity private placements (PIPEs), private placements, market issuances (ATMs), and the sale of other assets (e.g., selling BTC to buy ETH) for financing. Therefore, combined with the fact that Bitcoin DATCOs have not issued new debt, the outstanding debt balance of traceable reserve companies remains unchanged at $12.74 billion (including GameStop).
The known outstanding debt issued by Bitcoin reserve companies for purchasing BTC
Due to the lack of new debt issuance, the scale and maturity timing of DATCOs' debt are consistent. Nevertheless, June 2028 remains a month to watch, as $3.65 billion in outstanding debt will mature then. There are currently 16 months left until the first batch of debt matures (December 2026).
The earliest maturity, redemption, or resale date (nominal amount) for the debt used by Bitcoin reserve companies to purchase Bitcoin.
Similar to the maturity schedule, the interest scale paid quarterly by DATCOs issuing interest-bearing debt remains consistent with the previous quarter. Strategy (formerly MicroStrategy) has the highest quarterly interest expense at $17.5 million.
Actual interest expenses for Bitcoin reserve companies each quarter
Futures Market
The open interest in futures (including perpetual futures) experienced significant growth in the second quarter. As of June 30, the total open interest in futures on major platforms amounted to $132.6 billion, an increase of $36.14 billion (+37.47%) from the end of the first quarter on March 31. During the same period, open interest in Bitcoin futures increased by $16.85 billion (+34.92%), Ethereum futures by $10.54 billion (+58.65%), Solana futures by $1.97 billion (+42.82%), and other cryptocurrency futures by 38.52%. It is important to note that the total open interest does not fully represent the absolute amount of leverage, as some open positions may be hedged by spot long positions, keeping traders delta neutral with respect to the underlying asset.
Since the last 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 open interest percentage for CME (including perpetual and non-perpetual contracts) was 15.48%, an increase of 149 basis points from 13.99% on March 31, and a decrease of 58 basis points from January 1. The open interest percentage at this Chicago exchange peaked at 19.08% on February 21, followed by a decline of 360 basis points.
As of June 30, the open interest percentage for Ethereum futures at CME (calculated as CME Ethereum open interest divided by total market open interest) was 10.77%. This is an increase of 218 basis points from the end of Q1 2025 and a decrease of 118 basis points from January 1, 2025. Similarly, the open interest percentage for Bitcoin futures at CME increased by 380 basis points in Q2 to 26.32%, down 152 basis points from the beginning of the year.
CME futures open interest percentage
Perpetual futures
As of June 30, the open interest in perpetual futures was $108.922 billion, an increase of $29.2 billion (+36.66%) from the end of the first quarter. The open interest in perpetual futures is 14.18% lower than the historical high of $126.7 billion on June 10.
Open interest in perpetual futures categorized by asset
As of June 30, the open interest percentage for perpetual futures was 82.02%, a decrease of 231 basis points from the end of the first quarter.
Percentage of perpetual futures open interest
Quarter-end statistics of CeFi cryptocurrency lending market size
Open interest in perpetual futures categorized by platform
Conclusion
The leverage in the system continues to expand to new highs, with on-chain borrowing reaching historical highs, and the overall cryptocurrency collateralized loans reaching multi-year highs. Factors driving this growth include: the reflexive relationship between lending activity and price increases; reserve companies leveraging to become a significant new source of demand; and the expansion of new types of capital-efficient collateral in DeFi. This trend is also evident in the futures market, where open interest has also seen substantial growth.
Looking ahead, the ongoing collaboration between DeFi participants and the optimization of new collateral types suggest that the DeFi lending market is expected to continue growing in the coming quarters. Meanwhile, CeFi lending also benefits from the optimism driven by reserve companies and the overall market.
