Bitcoin lenders have estimated that lighter controls and clearer risk management may rebuild trust in a sector that is still haunted by the collapse of the former Celsius and Blockfi.
Bitcoin’s major lenders of the previous twist were to be implicated after the – User deposits in undercollateralized loans. When bitcoin (Btc) Prices fell and dried liquidity, billion -billions of customer funds were frozen or lost.
But implosions do not prove that crypto -supported loans are ruined by the design. Failures are mainly the result of poor risk management rather than the model itself. Some platforms are now taking the right steps, such as overcollateralization, while implementing tighter extermination thresholds, according to Alice Liu, head of research at CoinmarketCap.
“Better transparency and third-party conservation can also help reduce the risk of counterpart compared to opaque models such as Celsius,” he told cointelegraph.
But even some term sheets now promise No rehypothecation And the lower ratios of the delicacy (LTV), a sudden price swing in bitcoin can still put lending models under stress.
Bitcoin loans are emerging from Celsius-era models
The collapse of lenders such as Blockfi and Celsius has opened flaws in the way of lending early crypto lenders. Their models rely on rehypothecation, poor managing liquidity and overleveraged bets wrapped in a fuzzy structure that gave clients a small view of how their owners were managed.
The rehpothecation is a practice borrowed from traditional finances, in which brokers use the client collateral again for their own trade. This is a common and regulated approach, but it is usually trapped and disclosed to clients with strict reserve requirements.
Platforms such as Celsius and Blockfi are regular Customer deposits were used again. The main difference is Celsius aggressively sold to retail investorsWhile Blockfi has a stronger institutional trace. Blockfi’s relationship with now-bankrupt Crypto Exchange FTX and Brother Company Alameda Research has proven As toxic.
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The lending market to the current cycle is made up of mature investors and fewer “retail degens,” according to Liu. This means that funds locked for collateralized Bitcoin loans are longer holders, corporate ark and institutional funds.
“Their motivation now is around access to liquidity, taxation or variety -different, will not result in farming,” Liu said. “It reduced pressure for products to compete with better terms; instead, security assessment and risk were placed ahead of users’ product assessment.”
The remembered rehepothecation of many crypto users burned by Celsius. Platforms such as Wipe – Powered by Bitcoin Maximalist Jack Malers – promised not to restore Bitcoin customer, while those who took steps to explain how the model works and how it contributes to lower borrowing costs through greater transparency.
“Some players are still rehypothecate at BTC, which means they re-use collateral for unsafe lending elsewhere. That’s the essential same as the” black box “model we saw in 2021-2022,” said Wojtek Pawlowski, CEO and Accountable co-founder.
“So, whether it’s healthy or risky really depends on the actual structure and how it is transparent.”
Bitcoin -supported loans set a return
Crypto-Collateralized lending companies are among the biggest rising crypto stars just a few years. Galaxy Research estimates the joint loan book that sank to $ 34.8 billion in the first quarter of 2022.
But in the second quarter of that year, the Terra Stablecoin crashing dragged a series of losses throughout the sector. The major lenders such as Blockfi, Celsius and Voyager digital have been caught in disaster.
Book lending size dropped to $ 6.4 billion, an 82% decline from its glory days. The Bitcoin lending model is recovering traction, recovering $ 13.51 billion in CEFI’s open borrows at the end of the first quarter of 2025, representing a 9.24% quarter-over-quarter growth, Galaxy Research estimates.
Today’s lending models have adopted improved risk controls, such as lowering LTV ratios and clear guides to the regothecation. However, a major structural risk is that the whole model depends on a renewal of assets such as Bitcoin.
Business models of lenders such as Celsius and Blockfi are fragile, but their cracks begin to expand into a full crisis when Bitcoin prices fall.
Related: US Home Mortgage Regulator considers Bitcoin in the middle of the housing crisis
Modern lenders have met many of these issues using overcollateralization and stricter margin enforcement. But even LTV conservatives can be resolved quickly with sharp collapse.
“The BTC remains volatile, where a 20% price collapse can still cause mass prevention despite active platforms (monitoring) LTV and (implementation) real-time margin calls. If platforms repack collateral to yield techniques (rehpothecation, defi yield said Liu.
Safe Bitcoin lending models are not bullet -resistant
The volatility of Bitcoin has stabilized compared to its early years, but remains susceptible to sharp -day -day swings.
In early 2025, Bitcoin often shifted 5% a day amid trading tensions in the world, even with $ 77,000 in March, according to coingecko.
“(Bitcoin-supported loans) are safer, but not bullets,” Sam Mudie, co-founder and CEO of tokenized investment company Savea, told Cointelegraph. “The lower action, public proof-of-the-reference and, in some cases, actual banking licenses are real improvement.”
Even with the lower LTV ratios and term sheets that are now prohibiting rehpothecation, Mudie has warned that crypto lenders are still working on a single asset collateral pool whose value can fall by 5% overnight.
Bitcoin loans open up new financial use cases. As cointelegraph reported On June 15, collateralized loans allow users to tap into liquidity without selling their holdings, helping them avoid tax-gained taxes and even access the real estate market.
But the purists of Bitcoin remain careful. These cases often involve traditional financial mediators in the financial and legal system, introducing new layers of risk.
“Using Bitcoin to buy a home is a great headline. However, (Bitcoiners) also know the deals in possession that run on many legacy systems, not just smart contracts,” Mudie said.
Instead, Mudie thinks of more lending models to the native native: shared multisignature wallets, public onchain visibility, difficult limits to collateral reuse and automatic margin call when prices decrease. He added that platforms can protect users by lending only up to 40% of collateral amounts.
Today, Bitcoin lending is undergoing a careful regeneration driven by lighter controls and a stronger understanding of the dangers that fall into its first wave. But until the root of the root is solved, even the safe seekers of the models need to remain humble.
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