Orderly deleveraging in progress: Deep dive into crypto lending and futures markets for Q2 2026

Original Author: Zack Pokorny, Galaxy

Original Translation: Saoirse, Foresight News

As the market deleveraging trend persists, Q2 2026 marked the first quarter since Q4 2022 where on-chain lending volumes declined across all categories simultaneously, spanning centralized finance (CeFi), decentralized finance (DeFi), and the crypto-collateralized segment of collateralized debt position (CDP) stablecoins.

The key difference between this cycle and the previous bear market lies in the nature of the decline: outstanding loans have decreased in a steady, step-wise manner rather than through a sudden collapse. In Q2 2022, the crypto-collateralized lending industry plunged by over 55% in a single quarter, followed by further declines of 9% and 29% in Q3 and Q4 2022, respectively. In contrast, during the current deleveraging cycle, the market has seen three consecutive quarterly declines of just 10%, 5%, and 17%.

We believe this moderate pace of decline represents a healthier deleveraging cycle: it is driven by market participants proactively reducing risk in stages, rather than by大规模 forced liquidations or counterparty failures. Should lending volumes continue to contract in the future, we expect this step-wise decline pattern to persist, without repeating the cascading losses seen in 2022.

Deleveraging at the corporate treasury level was primarily driven by Strategy's completion of a $1.5 billion debt buyback in May 2026. This move reduced the debt used to support digital asset treasury strategies to $16.1 billion, roughly returning to the debt levels of such companies seen in July 2025.

In the futures market, total open interest (OI) remained relatively unchanged at quarter-end, declining only 3.08% quarter-over-quarter to $103.2 billion. Beneath this modest overall decline, internal structural divergence was evident: Bitcoin open interest fell 6.24% to $45.04 billion, while Ethereum open interest saw a steeper drop of 26.31% to $21.99 billion. At quarter-end, Bitcoin and Ethereum together accounted for 65% of total futures open interest. Notably, this quarter-end stability did not persist; by the end of July, futures open interest had rebounded to approximately $114 billion, with both Bitcoin (around $48 billion) and Ethereum ($25.74 billion) recovering from their Q2 lows.

Key Takeaways

• Overall, crypto-collateralized lending declined by $11.33 billion (-16.78%) in Q2 2026, falling to $56.16 billion, a decrease of 40.13% from the peak of $78.69 billion in Q3 2025.
• USD-denominated outstanding loans on DeFi lending applications declined for the third consecutive quarter, decreasing by $7.79 billion (-27.61%) to $20.43 billion.
• Galaxy Research tracks $16.1 billion in outstanding debt used by companies to directly purchase or supplement digital asset treasury strategies.
• Futures open interest (OI), including perpetuals, decreased 3.08% quarter-over-quarter to $103.2 billion.

Crypto-Collateralized Lending

The market overview chart below illustrates the historical and current major participants in the CeFi and DeFi crypto lending sectors. Amidst the crypto asset price crash and liquidity drought, some of the largest CeFi lending institutions collapsed between 2022 and 2023, marked with red warning indicators on the chart.

Centralized Finance (CeFi)

The table below compares the various CeFi lending institutions covered in this market analysis. Some institutions offer diverse businesses to investors; for example, Coinbase is primarily an exchange but also provides credit to users through over-the-counter crypto loans and margin financing. This analysis only counts the size of each institution's crypto-collateralized lending book.

As of June 30, Galaxy Research tracked CeFi outstanding borrowings of $22.98 billion, a quarter-over-quarter decrease of 9.62% (down $2.45 billion). Compared to the bear market low of $6.8 billion in Q4 2023, this represents growth of $16.14 billion, or 235.94%. However, it remains 37.16% below the all-time high of $36.58 billion reached in Q1 2022.

The overall contraction in CeFi lending during Q2 was primarily driven by a decline in Tether's secured outstanding loans; Galaxy, Coinbase, Ledn, Arch, Sygnum, and Milo all saw their lending books grow during the quarter.

Tether remains the dominant player in the CeFi lending market, holding a 58.54% market share, down 371 basis points quarter-over-quarter. Together with Maple (8.91%, +52bp QoQ) and Nexo (7.51%, +49bp QoQ), the top three institutions within our coverage account for 74.96% of the market, with a combined share declining 270 basis points quarter-over-quarter.

When comparing market shares, it's important to note significant differences among CeFi institutions: some only offer specific types of loans (e.g., accepting only BTC collateral, only altcoin collateral, or issuing fiat rather than stablecoin cash loans); some serve only specific client segments (institutional/retail); and operations are subject to jurisdictional restrictions. These factors result in varying expansion capabilities across different institutions.

The table below details the data sources for each CeFi institution tracked by Galaxy Research and the methodology for estimating book size. DeFi and on-chain CeFi data is transparent and easily accessible from public on-chain sources; however, CeFi data is much harder to obtain: accounting standards for outstanding loans vary across institutions, disclosure frequency is inconsistent, and comprehensive data sources are difficult to secure.

Note: Data provided by private third-party entities has not yet been formally verified by Galaxy Research.

Centralized and Decentralized Finance Lending

The USD-denominated outstanding loans on DeFi lending applications declined for the third consecutive quarter, decreasing by $7.79 billion (-27.61%) to $20.43 billion.

Combining DeFi applications and CeFi lending platforms, total crypto-collateralized outstanding borrowings at quarter-end stood at $43.41 billion, a quarter-over-quarter decrease of $10.24 billion (-19.08%), with the contraction primarily coming from on-chain borrowing. Notably, this is the first time since Q3 2023 that CeFi outstanding loans have exceeded DeFi lending applications.

Note: There is a risk of double-counting between total CeFi book size and DeFi borrowing statistics. Some CeFi institutions lend to off-chain clients via DeFi protocols. For example, a CeFi institution could pledge idle BTC, borrow USDC on-chain, and then lend that USDC to off-chain borrowers. This borrowing would be counted both in DeFi outstanding loans and appear on the institution's financial statements as a loan to its client. Due to a lack of disclosure and on-chain identity tagging, it is difficult to filter out such double-counting.

The quarter-over-quarter contraction in DeFi lending was greater than in CeFi, erasing DeFi's former scale advantage. At the end of Q2 2026, DeFi lending applications' market share fell to 47.05%, down 555 basis points quarter-over-quarter; at the end of Q1, that share stood at 52.6%.

The third major segment — the crypto-collateralized portion of collateralized debt position (CDP) stablecoins — declined by $1.09 billion (-7.86%) quarter-over-quarter. There is also double-counting risk here: some CeFi institutions generate funding by minting CDP stablecoins and then lend to off-chain clients.

Overall crypto-collateralized lending contracted by $11.33 billion (-16.78%) in Q2, reaching $56.16 billion, down 40.13% from the Q3 2025 peak of $78.69 billion.

End-of-Q2 2026 market share breakdown:

• DeFi lending applications: 36.37% (-544bp QoQ)
• CeFi lending platforms: 40.93% (+324bp QoQ)
• CDP stablecoin crypto-collateralized portion: 22.7% (+220bp QoQ)

Combining DeFi lending and CDP stablecoins as the on-chain lending track, their combined market share is 59.07%, down 324 basis points quarter-over-quarter.

Additional Perspectives on DeFi Lending

Outstanding borrowings on DeFi lending applications have been shrinking since reaching an all-time high of $47.13 billion on September 19, 2025; as of July 21, 2026, the figure stands at $21.94 billion, a decrease of $25.19 billion or 53.45% from the peak.

Since the end of Q1 2026, the pace of decline in DeFi borrowing has intensified, though there are recent signs of a slight moderation.

Stablecoins

On a 7-day moving average basis, the weighted average borrowing rate for stablecoins rose 27 basis points during the quarter from March 31 to June 30; after the quarter ended, the rate continued to climb to 3.88%.

This metric combines borrowing costs from lending protocols and CDP stablecoin minting fees, weighted by outstanding borrowings.

The chart below breaks down the two cost components: borrowing stablecoins via lending protocols and minting CDP stablecoins backed by crypto collateral. The two rate trends are highly correlated, but CDP minting rates are less volatile, as these rates are set manually on a periodic basis and do not adjust in real-time with market conditions. Over the past 21 months or more, both rates have been supported by the US federal funds rate as a floor.

In Q2, the USDC over-the-counter (OTC) benchmark rate ranged between 4.25%-5%; it held at 4.25% at quarter-end, a level that persisted until August 3.

The USDT OTC lending rate also fluctuated within the 4.25%-5% range.

Bitcoin

The chart displays the weighted average borrowing rate for Wrapped Bitcoin (WBTC) across lending applications on multiple public chains. On-chain WBTC is predominantly used as collateral, and borrowing demand is not strong, keeping borrowing costs persistently low. Unlike stablecoins, on-chain BTC lending rates are very stable, with users borrowing and repaying infrequently. In Q2, on-chain BTC lending rates fluctuated within a range of 0.44%-0.5%.

The historical spread between on-chain and off-chain (OTC) BTC lending rates persisted this quarter. OTC BTC borrowing demand stems from two sources: ① demand for shorting Bitcoin; ② using BTC as collateral to borrow stablecoins or fiat currency. The demand from shorting is not prevalent in the on-chain lending market, thus creating the cost differential between on-chain and OTC markets.

The OTC BTC rate held steady at 1% this quarter.

ETH and stETH

The chart below shows the weighted average borrowing rates for ETH and stETH (staked Ether generated by the Lido protocol) across various lending protocols and public chains. Historically, ETH borrowing costs have been higher than stETH because demand for borrowing ETH is stronger.

Users frequently borrow ETH to execute a looping leverage strategy: staking stETH (the receipt from staking ETH on Lido), borrowing ETH, and gaining leveraged exposure to Ethereum staking annualized yields. Under normal market conditions, ETH borrowing costs average within 50 basis points above or below the Ethereum staking APY. Once borrowing costs exceed staking yields, the strategy becomes uneconomical, making it difficult for the borrowing APY to remain persistently above staking yields.

Similar to WBTC, stETH is mostly used as collateral, so the cost of borrowing stETH is typically very low.

Users can use yield-bearing liquid staking tokens (LSTs) and liquid restaking tokens (LRTs) as collateral to borrow ETH at very low or even negative net rates. This gives rise to the classic looping strategy: repeatedly depositing LST/LRT as collateral, borrowing unstaked ETH, staking that ETH to obtain new LST/LRT, and continuing to borrow more ETH to amplify staking yield exposure. The precondition for this strategy is that ETH borrowing costs are lower than the staking annualized yield that LST/LRT can generate. Except for a few unusual periods, this strategy generally runs smoothly.

ETH OTC Lending Rates

Similar to BTC: the cost of borrowing ETH on-chain applications is generally lower than OTC lending. Two main reasons:

• Off-chain borrowing demand from short sellers is not as prevalent on-chain;
• The Ethereum staking yield serves as a floor for OTC lending rates: asset suppliers are unwilling to lend assets off-chain at rates below the staking yield. Conversely, in the on-chain market, the staking yield often acts as a ceiling for ETH lending rates.

Aave Lending Book Analysis

Below is a filtered, in-depth analysis of the Aave V3 core instance (currently the largest on-chain lending market), using three filtering criteria:

• Minimum debt threshold ($100): positions below this threshold are excluded from aggregate statistics to filter out small dust positions, though this skews results toward larger loans.
• Health Factor (HF) reporting cap (HF ≤ 50): positions with a health factor greater than 50 in the snapshot are excluded from core statistics; these over-collateralized positions are typically small in size and offer limited risk analysis value. Within the threshold, debt-weighted average health factor and percentile statistics only include positions with 1 ≤ HF ≤ 50; positions with HF < 1 are excluded from health factor statistics, while positions with HF = 1 are included.

A higher health factor indicates a safer position; a health factor below 1 means the position is subject to liquidation. Health Factor formula = (Total collateral value × Weighted average liquidation threshold) ÷ Total borrow amount.

• Debt-to-Equity Ratio (D/E): only positions where collateral value > debt (positive net equity) are included; positions with negative net equity are excluded from the D/E distribution and debt-weighted average D/E. This rule is independent of the $100 debt threshold: even if a loan exceeds $100, without positive net equity, it is also excluded from D/E statistics.

Based on the August 7, 2026 snapshot, there are 19,073 valid outstanding loans after filtering. Loans in efficiency mode (e-mode) account for only 8