BlockBeats News, August 18th, according to Coindesk, a report from Galaxy Research shows that the scale of cryptocurrency market mortgages grew by 27% in Q2, reaching $53.1 billion, the highest level since early 2022, mainly driven by demand for DeFi lending and a rebound in risk appetite. Bitcoin fell from $124,000 to $118,000, triggering over $1 billion in liquidations in the crypto derivatives market, the largest scale of long liquidations since early August. Analysts believe this is more like a healthy profit-taking rather than the beginning of a reversal, but it also highlights the market's vulnerability when leverage accumulates rapidly.
Galaxy analysts pointed out that pressure points have begun to surface. In July, Aave experienced a significant amount of withdrawals, pushing ETH borrowing rates above Ethereum staking yields, breaking the 'circular arbitrage' trading logic - that is, using staked ETH as collateral to borrow more ETH. This deleveraging process triggered a run on staking positions, causing the exit queue for the Ethereum Beacon Chain to set a historical record of 13 days.
Galaxy stated that since July, the borrowing costs of USDC in the over-the-counter market have continued to rise, while on-chain borrowing rates have remained stable. The spread between the two has widened to the highest level since the end of 2024. This divergence indicates that the off-chain demand for dollars has exceeded the on-chain liquidity, which could exacerbate volatility if the market environment tightens further. With a surge in loan volumes, concentrated borrowing power, tightening DeFi liquidity, and an expanding gap between the on-chain and off-chain dollar markets, the system is revealing more pressure points. The $1 billion liquidation on Thursday serves as a reminder that the impact of leverage is two-sided.
