Introduction
Crypto-collateralized lending dropped 9.81% in Q4 2025 from the all-time high set the previous quarter, a decline entirely due to a drawdown in onchain borrows. Onchain borrow activity, and borrow activity generally, is reflexive to prices and market activity. However, the introduction of looping strategies bound to market yields (e.g. funding rates) has brought onchain a new cohort of borrow activity that is sensitive to downturns in price, trading activity, and yield compression. Onchain borrows have continued to decline through the first quarter of 2026, falling 40% from the daily all-time high of $47.12 billion on Sept. 19, 2025.
The bigger story in Q4 is the divergence between onchain reflexivity and offchain resilience. This is something we noted could happen in a market downturn on the Galaxy Brains podcast and in an interview with Market Watch. Despite the largest onchain liquidation event in history happening in October, there are few visible signs of stress in centralized finance (CeFi) loanbooks across the fourth quarter. That outcome is consistent with the structural shift we highlighted in our report on Q3 2025, when outstanding loan balances pushed to new highs: borrowed-funds use cases have generally de-risked, un(der)collateralized credit and rehypothecated collateral have been largely self-regulated out of common practice (and was effectively never an option onchain), and collateral asset quality has improved, leaving lenders and borrowers better positioned to absorb volatility without forced deleveraging or loss of funds. Coinbase’s quarterly filings are a testament to this. Despite negative price action through the quarter and the largest liquidation event in crypto history, Coinbase reported that “no cumulative realized gains or losses occurred during the period presented as no Crypto assets held as collateral were sold or rehypothecated."
At the same time, onchain borrowing remains more rate-, yield-, and price-sensitive, particularly among the looping cohort tied to funding rates and market yields. As price, market activity, and yields compress, these positions can become uneconomical quickly, leading to sharper drawdowns in onchain borrows even when offchain loanbooks appear stable. The one caveat here is timing. The lack of observable CeFi stress in Q4 does not preclude pressure emerging with a lag, and a sustained price drawdown and the dust from Oct. 10 settling in Q1 could still translate into slower deterioration in CeFi credit metrics and risk appetite in subsequent quarters. Nonetheless, a major player like Coinbase growing its book and improving its collateralization ratio is a positive signal. Even in a downside scenario where CeFi credit metrics deteriorate with a lag, a gradual unwinding of loan books is a fundamentally different risk profile than what played out in 2022, when opaque, undercollateralized lending by the likes of Genesis, BlockFi, and Celsius led to overnight insolvencies, permanent loss of customer funds, and cascading contagion.
In the background, the crypto futures market saw a significant drawdown in open interest and is showing few signs of recovery. After the largest liquidation event in perps market history taking place on Oct. 10, futures open interest has collapsed below $100 billion for the first time since April 2025 and is 33% lower than it was on the day President Trump was inaugurated for his second term. Still, perps are proving to be a valuable product. Hyperliquid’s HIP-3 has brought equity, commodity, and forex perps onchain, allowing users to trade these markets 24/7. These products have gained meaningful mindshare and adoption amid the Q4 2025/Q1 2026 geopolitical and market volatility, offering onchain users a way to express macro views without relying on traditional exchange hours or intermediaries. Traditional markets have proven (yet again) that they can't efficiently price events that break on weekends or overnight, while onchain perps can. Recent events have made that structural advantage tangible. In a world where information flows endlessly at the speed of light, we should have markets that never close. Onchain perps make this possible.
As crypto lending and leverage markets mature and add step function improvements to traditional markets, their evolution is increasingly likely to mirror traditional credit infrastructure: tranched debt, fixed-rate loans, termed facilities, and more structured risk segmentation. Institutional entrants will accelerate this shift, bringing demand profiles distinct from the more cyclical and price-reflexive strategies that historically dominated onchain activity. On the derivatives side, synthetic perps are demonstrating the value of always-on markets, but they're ultimately limited by the traditional rails they reference. As onchain adoption deepens, the pressure on legacy markets to extend trading hours and modernize infrastructure will become harder to ignore. The result is a market that could look fundamentally different in the coming quarters, one that is less reflexive to crypto-native cycles and more integrated with broader capital markets. Taking this possibility into consideration, the next chapter of onchain-native leverage is being written now even as apathy and emotional despair plague the crypto community.
Key Takeaways
All told, crypto-collateralized lending contracted by $7.55 billion (-9.81%) in Q4 2025 to $69.55 billion. This is 6.79% lower than the Q4 2021 high of $74.62 billion.
The dollar-denominated value of outstanding loans on DeFi fell meaningfully in Q4, contracting by $10.66 billion (-24.15%) to $33.5 billion.
Galaxy Research is tracking more than $14 billion in debt outstanding used to directly buy or supplement the treasury strategies of digital asset treasury companies (DATs). The debt outstanding stagnated through the fourth quarter.
Futures open interest (OI), including perpetual futures (perps), declined 39.09% QoQ from $197.18 billion to $120.11 billion at the end of the quarter. This decline was due, in part, to the largest perps liquidation event ever occurring on Oct. 10, just 10 days into the start of the quarter.
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 one new DeFi app and six new instances of DeFi apps already covered in past reports. We also added one new CeFi lender. The additional DeFi apps are:
Loopscale on Solana.
Miscellaneous Ethereum-based applications found on DeFiLlama
The additional CeFi lender is:
Milo - Founded in 2019, Milo describes itself as "a licensed digital lending company pioneering the intersection of crypto and real estate finance. Milo created the crypto mortgage category in 2022 and has remained the category leader ever since. The company has raised $24 million from leading venture investors and offers crypto mortgages, allowing borrowers to use their digital assets as collateral to purchase property as well as crypto-backed loans. To date, Milo has originated over $300 million in total loans, including more than $100 million in crypto mortgages, reflecting strong and growing demand for crypto-native financial products.”
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.
As of Dec. 31, Galaxy Research tracked $27.56 billion of open CeFi borrows. This represents quarter-over-quarter (QoQ) growth of 11.66%, or $2.88 billion, and $20.23 billion (+282.37%) growth since the bear market trough of $7.21 billion in Q4 2023. Still, CeFi borrows outstanding are 25.58% below their Q1 2022 all-time high of $37.08 billion. Even so, CeFi loans outstanding grew for the eighth straight quarter in Q4 2025.
The fourth quarter saw most non-stablecoin issuer lenders’ books remain flat to slightly down. However, Coinbase posted its largest quarter of loanbook growth by absolute change. Through Q4, Coinbase added $438.69 million in net new loans outstanding, representing +47.89% change.
Tether is the dominant lender in our analysis, commanding a 61.84% share (up 267 basis points from last quarter) of the CeFi lending market. Add in Maple, which entered the top three in the fourth quarter (6.62% market share, up 33 basis points from the third quarter), and Galaxy (6.51% market share, down 78 basis points), and the top three tracked CeFi lenders control 74.98% of the market (down 18 basis points).
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: Galaxy Research has not formally vetted the values supplied by private third-party lenders.
CeFi and DeFi Lending
The dollar-denominated value of outstanding loans on DeFi fell meaningfully in Q4, contracting by $10.66 billion (-24.15%) to $33.5 billion. Combining DeFi apps with CeFi lending venues, there were $61.06 billion of outstanding crypto-collateralized borrows at quarter end. This represents a reduction of $7.79 billion (-11.31%) QoQ, predominantly driven by compression of onchain borrows. On a combined basis, DeFi lending app and CeFi loans outstanding are still above the 2020-2021 cycle high of $58.69 billion. Galaxy Research sees a few contributing factors to the contraction in DeFi lending against the growth in CeFi lending:
Looping becoming less economical: As market yields compressed and funding rates normalized after Oct. 10, the spread between borrow costs and yield earned on looped positions narrowed meaningfully. Ethena’s sUSDe (commonly used as collateral for looping strategies and in Pendle PT token collateral) yield fell from the 5%-7% range to 3.5% while USDC and USDT borrow costs sit between 3.75% to 4.15%. This dynamic flipped looping strategies on their heads, incentivizing users to close out their positions.
Negative price action: The Oct. 10 liquidation event and subsequent price drawdown mechanically reduced DeFi borrowing in two ways: falling collateral values forced borrowers to repay or be liquidated, and risk appetite for new leveraged positions dried up in the aftermath.
Historically low CeFi borrow costs: CeFi proxy rates used in our analysis fell below onchain borrow rates during Q4. This is an uncommon inversion of the typical dynamic where CeFi rates are higher or about equal to those of DeFi. Historically low absolute rates created an opportunistic borrowing window for CeFi counterparties, and the fact that offchain rates were cheaper than onchain only underscored how attractive the environment was for CeFi borrowers.
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 decline in outstanding borrows on DeFi lending applications, their relative lead over CeFi lending venues collapsed to Q1 2025 levels. At the end of Q4 2025, DeFi lending app dominance over CeFi lending venues stood at 54.86%, down from 64.24% at the end of Q3 2025.
The third leg of the stool, the crypto-collateralized portions of collateral debt position (CDP) stablecoin supply, increased by $262 million (+3.18%) 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 contracted by $7.55 billion (-9.81%) in Q4 2025 to $69.55 billion. This is 6.79% lower than the Q4 2021 high of $74.62 billion.
At the end of Q3 2025, DeFi lending applications represented 48.17% (-920 basis points from Q3 2025 share) of the crypto collateralized lending market, CeFi venues captured 39.62% (+768 basis points from Q3 2025 share) of the market, and the crypto-collateralized portion of CDP stablecoin supplies held 12.21% (+152 basis points from Q3 2025 share). Combining DeFi lending apps and CDP stablecoins, onchain lending venues held a 60.38% dominance (-768 basis points from Q3 2025 share) over the market.
Additional Views of DeFi Lending
Outstanding borrows on DeFi lending applications have seen material deterioration since reaching an all-time high of $47.12 billion on Sept. 19, 2025. Sitting at $28.17 billion as of February 16, 2026, onchain lending has collapsed by $18.94 billion, or 40.2%. Ethereum has seen a $16.02 billion decline in open loans on the chain since reaching its all-time high of $37.52 billion.
Stablecoins
The weighted average stablecoin borrow rate remained largely flat over the quarter, declining 28 basis points between Oct. 1, 2025 and Dec. 21, 2025. This is in line with our expectation that stablecoin interest rate volatility will remain tame and borrow costs will not exceed 10% through DeFi applications in 2026.
This figure is calculated by blending the costs of borrowing from lending protocols and CDP stablecoin mint fees, weighted by outstanding borrows.
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, although CDP stablecoin mint rates are typically less volatile because they are manually set periodically and do not move in lockstep with the market. Both rates have used the Fed Funds Rate as a floor for the last 18-plus months.
Benchmark over-the-counter (OTC) interest rates for USDC decreased 300 basis points through the quarter, falling from 6.5% to 3.5%. Since then, however, the rate has remained flat. OTC interest rates are often quoted in bands depending on collateral or borrower creditworthiness. The middle band is the market rate while the top and bottom bands mark the range interest rates are quoted between. This is also true for all OTC rates shown in the following sections.
The chart below tracks the same rates as above, but for USDT lending. The onchain rate for USDT has been more in line with the OTC mid-rate than that of USDC.
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 remains stable, because users borrow and repay it less frequently. The rate to borrow BTC onchain increased from 0.22% at the end of Q3 to 0.44% at the end of Q4.
The historical divergence between onchain and offchain (over-the-counter) borrow rates for BTC persisted throughout the third quarter, though offchain BTC borrow rates came down substantially. In the OTC market, BTC borrowing 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 declined 25 basis points over the quarter from 1.25% to 1%.
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 to borrow ETH has historically been higher than for stETH because the former is in greater demand. Users repeatedly borrow ETH to fuel looping strategies to gain leveraged exposure to the Ethereum network staking APY – using stETH, the token they receive for staking ETH through Lido, as collateral. As a consequence, the cost of borrowing ETH fluctuates within 50 basis points of the Ethereum network staking APY on average. 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.
As with WBTC, the cost of borrowing stETH is often low because the asset is primarily used as collateral and not much else.
By using liquid staking tokens (LSTs) or liquid restaking tokens (LRTs), both of which earn yield, as collateral, users borrow ETH at low, often negative, net interest rates. This cost efficiency fuels a looping strategy where users repeatedly use LSTs and LRTs as collateral to borrow unstaked ETH, stake it, and then recycle the fresh LSTs and LRTs 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 the LSTs and LRTs. Most of the time, users have been able to conduct this strategy without a hitch outside of a few notable periods.
ETH Over-the-Counter Rates
As with bitcoin, borrowing ETH through onchain lending apps has been historically 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
Since the last report we have made some amendments to the logic defining what a DAT is. To get the most accurate representation, we now define DAT as publicly traded companies whose main business may or may not be crypto-related but either way have a strategy to put crypto assets on the balance sheet. Given this amendment and greater access to public company data, the company mix used in the analysis may look different from previous reports. In addition, this quarter we started tracking Strategy’s preferred debt issuances. As a result, the amount of outstanding debt in this report is elevated compared to past ones.
We are now tracking more than $14 billion in debt outstanding used to directly buy or supplement the treasury strategies of DATs. The debt outstanding stagnante through the fourth quarter.
The following timeline details the earliest maturity, call, or put date of DAT-issued debt looking forward from January 2026. Even with the expanded data set, most of the DAT debt is due, at the earliest, between June 2027 and October 2028.
The following details the effective quarterly interest due on DAT-issued debt. These values changed only marginally quarter-over-quarter and VFH Parent LLC (a subsidiary of Nasdaq-listed Virtu Financial) still holds the largest quarterly interest burden.
Total crypto-related debt outstanding, including the debt taken on by DATs, came down slightly quarter-over-quarter. After reaching an all-time high in Q3 of $91.6 billion, total outstanding debt through onchain and offchain channels sits at $84.37 billion (an 7.89% decline quarter-over-quarter).
Futures Market
Futures open interest (OI), including perpetual futures (perps), declined 39.09% QoQ from $197.18 billion to $120.11 billion. This decline was due, in part, to the largest perps liquidation event in history occurring on Oct. 10, just 10 days into the start of the quarter. Over the course of Q4:
Bitcoin futures open interest decreased $27.44 billion (-34.2%) to $52.8 billion and stood at $43.97 billion as of Feb. 22.
Ether futures open interest decreased $18.18 billion (-34.22%) to $34.95 billion and stood at $23.21 billion as of Feb. 22.
SOL futures open interest decreased $5.28 billion (-46.42%) to $6.1 billion and stood at $4.26 billion as of Feb. 22.
The futures open interest of all other crypto assets decreased $26.16 billion to $26.26 billion (-49.91%) and stood at $24.24 billion as of Feb. 22.
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, and the total leverage ratio of the market is not directly observable from open interest alone.
CME’s share of open interest, including perps and non-perps, stood at 13.9% on Dec. 31, down 91 basis points QoQ. CME’s share of total ether OI (calculated as CME ETH OI divided by total market OI) stood at 15.44% as of Dec. 31 (down 210 basis points QoQ), and CME’s share of total bitcoin OI stood at 17.52% as of Dec. 31 (down 345 basis points QoQ).
Binance occupied the largest share of the perps market measured by OI with a 20.22% share on Dec 31. It was followed by CME with a 13.04% share and Gate with a 10.49% share. At the end of Q4, Hyperliquid held $7.47 billion in OI and commanded 6.22% of the total futures market (a 48-basis-point decrease from the end of Q3).
Perpetual Futures
Perps OI stood at $96.56 billion as of Dec. 31, declining by $61.75 billion (-39%) from the end of Q3. As of Feb. 22, perps OI was stood at $75.7 billion, representing a 56.91% decline from the all-time high reached in early October.
Perps OI dominance was 80.4% as of Dec. 31 and has increased 11 basis points from the end of Q3.
Conclusion
Q4 2025 stress-tested the structural improvements in crypto credit markets, and the results were encouraging. CeFi loanbooks absorbed the largest liquidation event in crypto history without visible signs of contagion, while onchain lending behaved as expected, contracting reflexively with prices and yields. The divergence between the two lending markets validates the de-risking that has taken place since 2022.
Looking ahead, the infrastructure for the next phase of growth is taking shape with talk of more structured credit products, institutional demand profiles, and real-world asset derivatives markets that never close. The next chapter of crypto leverage is being written now, even if sentiment hasn't caught up.
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