TL;DR
- Crypto-collateralized lending hits a new record high of $73.59 billion.
- On-chain borrowing now represents over 66% of all crypto-backed debt.
- DeFi lending surges 55% in Q3, reaching a total of $41 billion.
Crypto-collateralized lending grows by $20.46 billion in Q3 and reaches $73.59 billion, a level never seen before in the sector. Galaxy Research reports that total lending activity now exceeds the 2021-2022 cycle by $4.22 billion, equal to a 6.09% rise over the prior peak. The firm also tracks more than $12 billion in outstanding debt linked to crypto-acquiring entities.
On-chain activity drives most of the expansion. Galaxy Research identifies that on-chain borrowing now represents 66.9% of all crypto-collateralized debt, rising from 48.6% four years ago. CDPs, along with stablecoins such as DAI, and lending applications account for the momentum. The analytics unit confirms that borrowers move away from uncollateralized lending and adopt full-collateral structures.
DeFi lending gains 55% in Q3 and reaches $41 billion. User incentive programs and new collateral formats, including Pendle Principal Tokens, help increase volume. Centralized lending grows by 37% to $24.4 billion, although it remains smaller than the level reported in 2022.
A clear preference for stronger collateral profiles defines borrower behavior
Galaxy Research explains that lenders favor full-collateral systems while seeking institutional backing or preparing for public listings. On-chain data also identifies Tether as the leading CeFi lender, with nearly 60% of tracked loans. The USDT issuer expands its loan book by $630 million, marking the strongest quarterly expansion in its history.
DeFi lending applications now capture more than 80% of on-chain market volume, while CDP-backed stablecoins fall to 16%. Research Associate Zack Pokorny notes a migration from synthetic crypto-backed stablecoins to lending models built around centralized stablecoins such as USDT and USDC.
Deployments on new chains elevate activity as well. Aave and Fluid on Plasma stimulate borrowing volume, with Plasma surpassing $3 billion in fewer than six weeks.
On-chain metrics further reveal a leverage-driven liquidation event shortly after Q3 ended. More than $19 billion in perpetual futures positions are wiped out on October 10, marking the largest single-day decline in crypto futures history. Hyperliquid reports $10.08 billion in liquidations, while Bybit and Binance register $4.58 billion and $2.31 billion, respectively. Galaxy Research clarifies that the wipeout reflects mechanical de-risking triggered by automated deleveraging processes rather than broad credit deterioration.
Total industry debt, including DAT issuance, climbs to $86.3 billion, a new record. Outstanding debt remains stable throughout most of 2025, increasing by only $422 million in Q3. Futures Open Interest (OI) surges 41.46% quarter-over-quarter, rising from $132.75 billion to $187.79 billion by September 30. OI reaches $220.37 billion on October 6 before dropping 30% to $146.06 billion during the October 10 wipeout.
Galaxy Research tracks $24.37 billion in open CeFi borrows by the end of Q3. CeFi borrowing grows by $6.6 billion quarter-over-quarter, equal to a rise of 37.11%, and expands 239.4% from the $7.18 billion level recorded in Q4 2023.
