July 27, 2025
5 min read
George Steer
New crypto lending ventures increase precarious loans despite past wipeouts, fueling risk in the booming digital asset market.
The resurgence of digital asset prices has inspired a wave of new crypto lending ventures that are making precarious loans, despite the painful wipeout the sector experienced three years ago.
These lenders are often described as offering "microfinance on steroids," providing high-risk loans to borrowers with little traditional credit history but backed by volatile crypto collateral. The rapid growth in this sector is raising concerns among market watchers about the potential for another crisis if digital asset prices falter again.
Crypto lenders operate by allowing users to borrow funds against their cryptocurrency holdings, often with high leverage and short repayment terms. This model can amplify returns in a bull market but also magnifies losses when prices drop.
Despite the lessons from previous market crashes, some new entrants are aggressively expanding their loan books, betting on continued price appreciation. The lack of regulatory oversight and transparency in many of these platforms adds to the uncertainty and risk.
Investors and analysts warn that while the digital asset boom offers opportunities, the lending practices resemble a high-stakes game that could unravel quickly, impacting not just borrowers but the broader crypto ecosystem.
Source: Financial Times