The State of Crypto Leverage – Q2 2025

Introduction

Leverage in the crypto market resumed its upward trajectory in the second quarter following declines in crypto-backed loans and in the futures market during the first three months of the year. Coming off the heels of Liberation Day market volatility in early April, renewed optimism around crypto and growth in asset prices supported the expansion in leverage through the second quarter. Notably, onchain crypto-collateralized loans grew by 42% during the period to an all-time high of $26.5 billion.

Digital asset treasury companies (DATCOs) remained a central topic in the second quarter. However, their outsized reliance on non-debt-based strategies to fuel asset purchases left the outstanding amount of debt issued by these entities unchanged quarter-over-quarter.

This write-up tracks the trends in onchain leverage across crypto-collateralized lending on DeFi and CeFi venues, publicly traded treasury companies, and the crypto futures markets. It picks up where we left off in the Q1 leverage report but captures new venues in CeFi and DeFi lending and the futures market.

Key Takeaways

• As of June 30, Galaxy Research tracked $17.78 billion of open CeFi borrows. This represents quarter-over-quarter (QoQ) growth of 14.66%, or $2.27 billion, and $10.59 billion (+147.5%) growth since the bear market trough of $7.18 billion in Q4 2023.

• The dollar-denominated value of outstanding loans on DeFi applications rebounded strongly from Q1, growing by $7.84 billion (+42.11%) to $26.47 billion – a new all-time high.

• Digital asset treasury companies (DATCOs) remained a central theme in the second quarter. The rise of Ethereum treasury companies was the salient trend in DATCOs between March and June; such entities were less prevalent in the first months of the year.

• Due to the lack of new debt issuances by bitcoin DATCOs, the outstanding debt balance of treasury companies with trackable data saw no change. The magnitude and due date timeline remain unchanged from our previous report given the lack of new debt issued. Still, June 2028 remains the month to watch with $3.65 billion of outstanding debt coming due over the course of the month.

• Open interest for futures, including perpetual futures (perps), grew substantially quarter-over-quarter. Futures open interest across all the major venues stood at $132.6 billion as of June 30.

• Perps open interest stood at $108.922 billion as of June 30, growing by $29.2 billion (+36.66%) from the end of Q1.

Crypto-Collateralized Lending

The market map below highlights some of the major past and present players in the CeFi and DeFi crypto lending markets. Some of the largest CeFi lenders by loan book size crumbled in 2022 and 2023 as crypto asset prices tanked and liquidity dried up. These lenders are flagged with red caution dots in the map below. Since Galaxy’s last crypto leverage report, we have added five DeFi apps, one CeFi lender, and one collateral debt position (CDP) stablecoin to our analysis.

The additional DeFi apps are:

• Fraxlend on Ethereum, Fraxtal, and Arbitrum.

• Curve Llamalend on Ethereum, Arbitrum, Fraxtal, and OP Mainnet.

• Lista on BSC.

• Hyperlend on HyperEVM.

• Venus on BSC, Ethereum, Unichain, Arbitrum, zkSync Era, Base, OP Mainnet, and opBNB.

Existing apps that have expanded chain coverage include:

• Echelon on Echelon chain.

• Save on Eclipse.

• Euler on Arbitrum.

• Kamino on 13 new markets.

• Dolomite on Ethereum.

The additional collateral debt position (CDP) stablecoin includes:

• Felix (native to HyperEVM)

The newly added CeFi lenders include:

• Figure Markets

• Nexo

CeFi

The table below compares the CeFi crypto lenders in our market analysis. Some of the companies offer multiple services to investors. Coinbase, for example, primarily operates as an exchange but also extends credit to investors through over-the-counter cryptocurrency loans and margin financing. The analysis shows only the size of their crypto-collateralized loan books, however.

This is the first quarter Figure Markets has contributed to the report. Figure is a top player in the onchain credit space, boasting $11.1 billion in private credit and home equity lines of credit (HELOCs). Adjacent to this is a bitcoin-backed lending product which is included in the data below. While Figure’s bitcoin lending product has been live since April 2024, the company has only recently begun to incentivize its use and growth.

This is also the first quarter Nexo has contributed to our report. The lender has been in operation since 2018 and exclusively serves non-U.S. clients. However, the company recently unveiled a plan to re-enter the U.S. market, after having exited it in 2023.

As of June 30, Galaxy Research tracked $17.78 billion of open CeFi borrows. This represents quarter-over-quarter (QoQ) growth of 14.66%, or $2.27 billion, and $10.59 billion (+147.5%) growth since the bear market trough of $7.18 billion in Q4 2023.

Galaxy Research sees a few main factors guiding growth in the CeFi lending sector:

• Reflexivity of borrowing activity against expanding prices throughout the quarter – as prices rise, borrowing activity typically follows. This is true of DeFi and CeFi lending.

• Increased competition is possibly starting to be manifested in costs of borrowing. More competition means costs stay better contained which leads to more attractive rates at better scale in the market. This is marked by growth in borrowing activity over the quarter against relatively stable stablecoin and BTC borrow costs.

• Treasury companies are coming to CeFi lenders to finance their activity, representing a new demand source of significant size.

Ledn has fallen out of the top three lenders by outstanding loans due to a strategic shift in how it issues loans. In Q2, Ledn made the decision to go all-in on bitcoin-backed lending, removing yield products and Ethereum from its product mix. This decision rewarded Ledn with its highest ever quarter of bitcoin-backed loan originations. However, due to the removal of institutional lending (from discontinuing its bitcoin and Ethereum yield products) its overall book size compared to Q1 was lower. For added clarity, the book size reported by Ledn as of the end of Q2 is 100% USD-denominated loans, with 99% being bitcoin-backed loans, and 1% legacy ether-backed loans that will be rolling off gradually.

Tether, Nexo, and Galaxy are the top three lenders Galaxy Research tracks by outstanding loan values. As of June 30, Tether maintained $10.14 billion of open loans, Nexo $1.96 billion, and Galaxy $1.11 billion.

Tether is the dominant lender in our analysis, commanding a 57.02% share of the CeFi lending market. Add in Nexo (11.01% market share) and Galaxy (6.23% market share), and the top three tracked CeFi lenders control 74.26% of the market.

When comparing market shares, it’s important to note the distinctions between CeFi lenders. Some lenders only offer certain types of loans (e.g., BTC-collateralized only, altcoin-collateralized products, and cash loans that do not include stablecoins), only service certain types of clients (e.g., institutional vs. retail), and only operate in certain jurisdictions. The combination of these factors allows some lenders to scale more easily than others.

The table below details the sources of Galaxy Research’s data about each CeFi lender and the logic we used to calculate the size of their books. While DeFi and onchain CeFi lending figures are retrievable from onchain data, which is transparent and easily accessible, retrieving CeFi data is tricky. This is due to inconsistencies in how CeFi lenders account for their outstanding loans and how often they make the information public, as well as the general difficulty of obtaining this information.

Note, the values supplied by private third-party lenders have not been formally vetted by Galaxy Research.

CeFi and DeFi Lending

The dollar-denominated value of outstanding loans on DeFi applications rebounded strongly from Q1, growing by $7.84 billion (+42.11%) to $26.47 billion – a new all-time high. Combining DeFi apps with CeFi lending venues, there were $44.25 billion of outstanding crypto-collateralized borrows at quarter-end. This represents an expansion of $10.12 billion (+29.64%) QoQ, largely driven by the growth in open borrows across DeFi lending apps. Only Q4 2021 ($53.44 billion) and Q1 2022 ($48.39 billion) saw more loans outstanding than that of Q2 2025.

Note: There is potential for double-counting between total CeFi loan book size and DeFi borrows. This is because some CeFi entities rely on DeFi applications to lend to offchain clients. For example, a hypothetical CeFi lender may pledge its idle BTC to borrow USDC onchain, then lend that USDC to a borrower offchain. In this scenario, the CeFi lender’s onchain borrow will be present in the DeFi open borrows and in the lender’s financial statements as an outstanding loan to its client. The lack of disclosures or onchain attribution makes filtering for this dynamic difficult.

As a result of the quarter-over-quarter growth in outstanding borrows on DeFi lending applications, their lead over CeFi lending venues expanded back toward the Q4 2024 all-time high. At the end of Q2 2025, DeFi lending app dominance over CeFi lending venues stood at 59.83%, up from 54.56% at the end of Q1 2025 and down 216 basis points from the Q4 2024 high when the share was 61.99%.

The third leg of the stool, the crypto-collateralized portions of collateral debt position (CDP) stablecoin supply, increased by $1.24 billion (+16.45%) QoQ. Again, there is potential for double-counting between total CeFi loan book size and CDP stablecoin supply, because some CeFi entities might rely on minting CDP stablecoins with crypto collateral to fund loans to offchain clients.

All told, crypto-collateralized lending expanded by $11.43 billion (+27.44%) in Q2 2025 to $53.09 billion. Again, only Q4 2021 ($69.37 billion) and Q1 2022 ($63.43 billion) saw higher total crypto-collateralized lending and CDP stablecoin balances.

At the end of Q1 2025, DeFi lending applications represented 49.86% (+515 basis points from Q1 2025 share) of the crypto collateralized lending market, CeFi venues captured 33.48% (-373 basis points from Q1 2025 share) of the market, and the crypto-collateralized portion of CDP stablecoin supplies held 16.65% (-142 basis points from Q1 2025 share). Combining DeFi lending apps and CDP stablecoins, onchain lending venues held a 66.52% dominance (+373 basis points from Q1 2025 share) over the market, down from the all-time high of 66.86% at the end of Q4 2024.

Additional Views of DeFi Lending

DeFi borrowing continued to climb to all-time highs with activity on Ethereum leading the charge. Ethena’s Liquid Leverage program in collaboration with Aave, in addition to sustained use of Pendle principal tokens (PTs) on Aave and Euler, has played a heavy hand in the expansion of onchain lending markets. Under the Liquid Leverage program and Pendle PT tokens, users enact “looping strategies” that allow them to arbitrage the yield of their collateral assets against the cost of borrowing assets against them. This is a strategy that is commonly seen with ETH and stETH (liquid staked ETH), where users acquire leveraged exposure to the Ethereum staking APY.

Since the end of the quarter on June 30, the value of assets supplied to DeFi lending applications has increased $20.06 billion (+33.91%) to $79.22 billion. Ethereum maintains a dominance of 78.22% over all DeFi lending supplies as of July 31, 2025. Solana held $4.3 billion of deposits and a share of 5.43% as of the same day.

Assets borrowed on DeFi lending applications have followed a similar path to that of supplies. Between June 30 and July 31, DeFi lending apps added $6.2 billion (+33.94%) worth of new borrows. Ethereum saw the largest growth in both absolute and relative terms, adding $8.48 billion of new borrows at a growth rate of +42.73%. Ethereum Layer-2s grew at the second fastest rate over the same period, expanding their total borrows by $309.73 million (+24.71%).

As of Aug. 8, there were $5.79 billion worth of Ethena-issued assets on Aave V3 Core, 55.88% of which are Pendle PT tokens. There is an additional $2.45 billion between USDe (Ethena’s synthetic dollar) and sUSDE (staked USDe, which carries yield derived from USDe’s underlying collateral).

Onchain and Offchain Interest Rates

The following compares borrow rates for stablecoins, BTC, and ETH in onchain lending markets and through offchain venues.

Stablecoins

The weighted average stablecoin borrow rate increased slightly from 4.7% on March 31 to 4.96% as of July 31, using the seven-day moving average of the weighted average stablecoin borrow rates and CDP stablecoin mint fees. The slight increase is due to a modest uptick in borrowing activity coinciding with few updates to stablecoin lending market parameters. Stablecoin rates on Aave, the largest liquidity hub for stablecoins, have gone unchanged since mid-March 2025.

The following breaks out the costs of borrowing stablecoins through lending applications and minting CDP stablecoins with crypto collateral. The two rates track each other closely, with CDP stablecoin mint rates typically being less volatile because they are manually set periodically and do not move in real-time with the market.

Over-the-counter (OTC) interest rates for USDC have begun to creep higher since the beginning of July while they remain mostly flat on onchain lending apps. The spread between onchain USDC rates and OTC rates (determined by onchain rates less OTC rates) is at its widest point since the week of Dec. 30, 2024. Onchain rates for USDC were 180 basis points below those of the OTC market as of July 28, 2025 Even as prices expanded throughout the quarter, onchain and offchain stablecoin rates remained steady.

The chart below tracks the same rates as above, but for USDT lending. Onchain and offchain rates for USDT have been tighter than those of USDC since the beginning of July.

Bitcoin

The chart below shows the weighted borrow rate for wrapped bitcoin (WBTC) on lending apps across several applications and chains. The cost of borrowing WBTC onchain is often low because wrapped bitcoin tokens are primarily used for collateral in onchain markets and are not in high demand for borrowing. In contrast to stablecoins, the cost of borrowing BTC onchain continues to be stable, because users borrow and repay it less frequently.

The historical divergence between onchain and offchain (over-the-counter) borrow rates for BTC persisted throughout the second quarter. In the OTC market, BTC demand is driven primarily by two factors: 1) the need to short BTC and 2) the use of BTC as collateral for stablecoin and cash loans. The former is a source of demand not commonly found in onchain lending markets, hence the spread between onchain and over-the-counter BTC borrow costs.

OTC rates for BTC climbed a tick higher in early April as the market rebounded strongly off the Liberation Day market tantrum lows. However, they have drifted back down to the 2.25% level they started the second quarter at as the market began to cool toward the end of July.

ETH and StETH

The chart below shows the weighted borrow rate for ETH and stETH (staked ether on the Lido protocol) on lending apps across several applications and chains. The cost of borrowing ETH has historically been higher than that of stETH because users borrow ETH to fuel looping strategies to gain leveraged exposure to the Ethereum network staking APY – using stETH as collateral. As a consequence, the cost of borrowing ETH typically fluctuates within 30-50 basis points of the Ethereum network staking APY. This strategy becomes uneconomical when the cost to borrow exceeds the staking yield, so it is uncommon for the borrow APR to clear the staking APY for extended periods of time. However, there was a large spike in ETH borrow rates in July as large withdrawals were made from Aave V3 Core on Ethereum. More details on the impact of this will be covered below.

As with WBTC, the cost of borrowing stETH is often low because the asset is primarily used as collateral and maintains relatively low utilization.

By using LSTs or liquid restaking tokens (LRTs), which earn yield, as collateral, users secure ETH loans at low, often negative, net borrow rates. This cost efficiency fuels a looping strategy where users repeatedly use LSTs as collateral to borrow unstaked ETH, stake it, and then recycle the resulting LSTs to borrow even more ETH, thereby amplifying their exposure to the ETH staking APY. This strategy only works so long as the borrow cost for ETH is below the staking APY achieved on stETH. Most of the time, users have been able to conduct this strategy without a hitch. However, between July 15 and July 25, Aave V3 Core on Ethereum saw a flight of nearly 300,000 ETH. This sent borrow rates for ETH soaring, thereby making the looping strategy unprofitable (denoted by the net rate in the chart below persisting above 0%).

This had a cascading effect on the Ethereum staking exit queue as users rushed to unwind their looped positions, which required ETH to be unstaked from Ethereum’s Beacon Chain. At its peak, the time to unstake ETH reached nearly 13 full days, the highest it has ever been. This event on Aave highlights that, while uncommon, DeFi markets can have material impacts on the operations of blockchains themselves.

ETH Over-the-Counter Rates

As with bitcoin, borrowing ETH through onchain lending apps is noticeably cheaper than borrowing it over the counter. This is driven by two factors: 1) as with BTC, there is demand from short sellers through offchain venues that is not as common onchain and 2) the Ethereum staking APY serves as a floor rate for offchain borrowing because there is little incentive for suppliers to deposit assets with offchain venues, or for offchain venues to lend assets out, at rates below the staking APY. So, with ETH, the floor rate for offchain lending is often the staking APY while onchain the staking APY is often the ceiling rate.

Corporate Debt Strategies

Digital asset treasury companies (DATCOs) remained a salient theme in the second quarter. The rise of Ethereum treasury companies was the defining trend of DATCOs between March and June; such entities were less prevalent in the earlier months of the year. A key differentiator between some of the bitcoin treasury companies and the Ethereum ones is the bitcoin treasury companies’ use of debt to finance asset acquisitions. The large Ethereum treasury companies that have come online over the last few months have entirely relied on private investments in public equity (PIPEs), private placements, at-the-market offerings (ATMs), and sales of other assets (e.g., selling BTC to buy ETH). As a result of this, combined with the lack of new debt issuances by bitcoin DATCOs, the outstanding debt balance of treasury companies with trackable data saw no change in their outstanding debt issued, which stands at $12.74 billion (including GameStop).

Read Galaxy Research’s holistic report covering the full span of the DATCO universe.

The magnitude and due date timeline of DATCO debt remain unchanged from our previous report given the lack of new debt issued. Still, June 2028 remains the month to watch with $3.65 billion of outstanding debt coming due over the course of the month. As it stands, we are 16 months away from the first debt becoming due in December 2026.

Like the maturity timeline, the magnitude of quarterly interest owed by DATCOs issuing interest-bearing debt remains unchanged from last quarter. Strategy (formerly MicroStrategy) is responsible for the most interest each quarter at $17.5 million.

Futures Market

Open interest for futures, including perpetual futures (perps), has grown substantially QoQ. Futures open interest across all the major venues stood at $132.6 billion as of June 30. This represents an increase of $36.14 billion (+37.47%) from the amount of open interest at the end of Q1 on March 31. Over the same period, bitcoin futures open interest increased $16.85 billion (+34.92%), Ethereum futures open interest increased $10.54 billion (+58.65%), Solana futures open interest increased $1.97 billion (+42.82%), and the futures open interest of all other crypto assets increased (+38.52%). It’s important to note that the entirety of the futures open interest figure does not constitute an absolute amount of leverage. This is due to the fact that some portion of the open interest figure can be offset by long spot positions, giving traders delta-neutral exposure to the underlying asset.

Since last quarter, we added the following futures venues:

• BingX

• Bitunix

• CoinEx

• Coinbase

• Gate

• KuCoin

• MEXC

• dYdX

CME’s share of open interest, including perps and non-perps, stood at 15.48% as of June 30, up 149 basis points from its share of 13.99% on March 31 and down 58 basis points from Jan. 1. The storied Chicago exchange’s share of total market OI peaked at 19.08% on Feb. 21 and has since declined 360 basis points.

CME’s share of total Ethereum OI (calculated as CME Ethereum OI divided by total market OI) stood at 10.77% as of June 30. This represents an increase of 218 basis points from the end of Q1 2025 and a decrease of 118 basis points from January 1, 2025. Similarly, CME’s share of total bitcoin OI increased 380 basis points over the second quarter to 26.32% and has declined 152 basis points since the start of the year.

Perpetual Futures

Perps OI stood at $108.922 billion as of June 30, growing by $29.2 billion (+36.66%) from the end of Q1. Perps OI is sitting 14.18% below all-time high of $126.7 billion reached on June 10. Bitcoin perps’ market share stood at 41.77%, Ethereum 23.13%, Solana 5.88%, and all others 29.23% as of June 30.

Perps OI dominance was 82.02% as of June 30 and has declined 231 basis points from the end of Q1.

Binance occupies the largest share of the perps market measured by OI at a 20.83% share. This is followed by Bybit at a 15.41% share and Gate at a 12.85% share. At the end of Q2, Hyperliquid held $7.516 billion in OI and commanded 6.91% of the total perps market.

Conclusion

Leverage in the system continues to expand to new highs across the board, with onchain borrows at all-time highs and crypto-collateralized loans as a whole at multi-year highs. Driving factors of the growth are related to a combination of the reflexivity of borrowing activity against rising prices throughout the quarter; treasury companies levering up representing a new demand source of significant size; and the scaling of new, capital-efficient collateral types in DeFi. This trend was mirrored in the futures market, where open interest also saw substantial growth.

Looking ahead, continued collaboration between DeFi parties and the fine-tuning of newly established collateral types suggest the DeFi lending market is poised for continued growth in the coming quarters. In parallel, CeFi lending has tailwinds from treasury companies and optimism around the market broadly.