The timing mirrored that of late 2021, when lending peaked just before scandals and bankruptcies caused a crypto market crash.
In the latest crypto news, the digital assets lending sector set a new record in the third quarter of 2025, with combined loans reaching $73.6 billion, as digital asset prices soared to all-time highs.
Galaxy Digital Research reported the figure surpassed the previous peak of $69.4 billion established in the fourth quarter of 2021.
The latest crypto loan amount represented nearly triple the level recorded in the first quarter of 2024, when the industry showed signs of revival following approval of US spot Bitcoin exchange-traded funds.
Activity increased through the year as the sector blossomed under the pro-crypto agenda of the second President Donald Trump administration.
Bitcoin price tumbled more than 20% in recent weeks after setting record highs, triggering concerns over a new bear market.
The timing of the lending peak relative to price reversals echoed the pattern observed in late 2021, when activity peaked before scandals and bankruptcies triggered a market crash.
The record lending figure confirmed the current cycle operated as leverage-driven rather than spot-only.
In the latest crypto news, retail investors borrowed to leverage long positions, and hedge funds tapped lending for basis trades and short-term liquidity.
On the other hand, the digital asset treasury (DAT) companies borrowed against Bitcoin and Ethereum holdings to generate yields.
As loans reached all-time highs alongside prices, the system became reflexive.
Rising collateral values supported more borrowing, while price declines of 20% caused loan-to-value ratios to jump, haircuts to tighten, and forced deleveraging to hit both cryptocurrencies and treasury company stocks simultaneously.
Galaxy’s lending report showed three structural shifts in the post-FTX architecture.
On-chain overcollateralized protocols survived and scaled, while centralized finance platforms operated at a smaller scale but remained opaque.
Additionally, documented double-counting emerged, as centralized finance borrowed from decentralized finance and re-lent it off-chain.
The $73.6 billion in loans sitting on a blended stack meant counterparty chains lengthened again. One price shock triggered automated liquidations on decentralized platforms, as well as margin calls and balance-sheet stress in centralized finance, all in the same move.
The plumbing appeared cleaner, but connectivity tightened across the system.
Crypto lending served as a key indicator for market sentiment as participants used credit to add leverage and enhance returns.
The boom in digital asset treasury companies led firms to borrow cash against crypto holdings to generate yields, creating new transmission channels from spot volatility into credit stress.
When Bitcoin reversed, treasury companies faced collateral and equity hits while debt remained fixed, pushing firms toward de-risking during drawdowns.
What began as a niche corporate strategy transformed into a transmission channel that magnified declines across ETFs, treasury vehicles, and underlying cryptocurrencies.
The pro-crypto policy backdrop and ETF infrastructure embedded leverage into institutional rails.
Banks, prime brokers, and structured products lent safely against ETFs and large-cap crypto, which deepened liquidity but meant that deleveraging episodes now impacted a broader, more institutional funding base than in 2021.
Rising loan volumes indicated that crypto risk had become tightly coupled with mainstream balance sheets, rather than merely serving as a sentiment gauge.
Record lending at market peaks signaled that cycle gains stacked on credit, improving liquidity and trade sophistication on the way up, while reloading core vulnerabilities.
In other crypto news, the architecture has evolved since the FTX collapse, but systemic risk has remained embedded in the record loan stack.
The combination of on-chain protocols, opaque centralized finance operations, and double-counting created interconnected points of failure.
Digital asset treasury companies emerged as central borrowers, using cryptocurrencies as collateral for cash and yield strategies.
The concentration of borrowing among these firms created vulnerability where stress at one large treasury company could cascade through connected lenders and collateral chains.
Opacity in centralized finance lending meant counterparty exposures remained unclear despite post-FTX reforms.
When prices turned, the lending boom faced the potential for a synchronized margin unwind across decentralized finance, centralized finance, and listed Bitcoin proxy stocks.
The structural tightness between crypto markets and traditional finance increased through ETF-linked lending and institutional participation.
A deleveraging episode no longer stayed confined to crypto-native platforms but propagated through prime brokers and mainstream balance sheets.
The $73.6 billion in loans represented the highest level of crypto credit on record, built during a period when Bitcoin printed all-time highs.
The lending peak arrived just as prices began reversing, mirroring the late 2021 pattern that preceded the sector’s most severe credit crisis.
The record levels of crypto loans in the third quarter confirm a leverage-driven market structure with evolving architecture but persistent systemic vulnerabilities.
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