Crypto Leverage Hits Record High in Q3 as DeFi Dominance Reshapes Market Structure
Crypto-collateralized borrowing surged to a record $73.6 billion in Q3, marking the highest leveraged quarter on record, driven by growth in decentralized finance (DeFi) and new collateral types. On-chain lending accounted for 66.9% of all crypto-collateralized debt, with DeFi loans reaching $41 billion, a 55% rise, fueled by incentives, new collateral types, and deployments on Plasma chains such as Aave and Fluid. Plasma borrows exceeded $3 billion within five weeks of launch.
Centralized lenders saw outstanding loans increase 37% to $24.4 billion, with Tether comprising about 60% of tracked centralized finance (CeFi) lending. Meanwhile, DeFi applications now capture over 80% of the on-chain lending market, while collateralized debt position (CDP)-backed stablecoins have shrunk to 16%. The total industry debt, including decentralized autonomous token (DAT) issuance, hit a record $86.3 billion, with corporate crypto-DAT debt topping $12 billion.
Although leverage is rising again, market risk is viewed as healthier than during the 2021–22 cycle due to collateralized structures replacing unbacked credit. Post-Q3, leverage-driven liquidations exceeded $19 billion, marking the largest single-day crypto futures cascade; however, auto-deleveraging mechanisms helped limit systemic risk.
