THE STATE OF CRYPTO LEVERAGE – Q2 2025

Summary from the TLDR Crypto newsletter

Crypto leverage expanded significantly across all major sectors in Q2 2025, with DeFi lending reaching an all-time high of $26.47 billion (+42.11% QoQ), CeFi lending growing to $17.78 billion (+14.66% QoQ), and futures open interest surging to $132.6 billion (+37.47% QoQ). Growth was driven by three primary factors: reflexivity between rising asset prices and borrowing activity, increased demand from digital asset treasury companies, and the scaling of capital-efficient collateral strategies in DeFi, particularly Ethena's Liquid Leverage program with Aave and Pendle principal token looping strategies. The quarter highlighted DeFi's systemic importance when large ETH withdrawals from Aave caused borrowing rates to spike above staking yields, creating a cascading effect that pushed Ethereum's unstaking queue to a record 13 days. Market concentration remains high, with Tether commanding 57% of CeFi lending and the combined leverage ecosystem reaching $53.09 billion in total crypto-collateralized lending, approaching levels last seen in early 2022.