Crypto Borrowing Activity Rebounds Modestly as Leverage Rebuilds Cautiously

Crypto borrowing is beginning to recover not as a renewed risk cycle, but as a gradual re-engagement with leverage following the late-2025 market correction.

According to a CryptoQuant report, stablecoin borrowing activity on Aave v3 bottomed in December 2025 and has since ticked higher in early 2026.

While total borrow volumes have increased from their lows, the pace of recovery remains measured, signaling cautious leverage rebuilding rather than aggressive speculative expansion.

DeFi Lending: Early Signs of Re-Engagement

On Aave v3, borrowing activity has recovered incrementally from December lows, suggesting that some market participants are returning to leverage as conditions stabilize. However, the rebound remains subdued relative to prior peaks, indicating that confidence is returning selectively rather than broadly.

This type of recovery typically reflects defensive positioning. Borrowers appear focused on maintaining optionality and liquidity access rather than expressing directional conviction through high leverage.

CeFi Credit Activity: Modest Improvement, Lower Baseline

A similar pattern is visible in centralized lending. Credit activity on Nexo, one of the largest CeFi lending platforms, showed modest improvement in January 2026.

Credit withdrawals reached approximately $24 million during the month, representing a 9% month-over-month increase. Despite this rebound, borrowing activity remains structurally below mid-2025 levels, underscoring how much leverage was removed during the broader market correction.

The recovery so far reflects normalization rather than expansion.

ETH Borrowing Gains Importance as Collateral Use Shifts

Borrowing activity backed by Ethereum has increased meaningfully over the past year. From September 2024 to January 2026, total ETH borrowing on Aave v3 rose to roughly 1.0 million ETH, representing a 48% month-over-month increase and approximately 2.7 times the level observed in September 2024.

ETH has also grown in importance as collateral on Nexo. It now represents 12% of total pledged collateral, up from 9% in Q2 2024. This suggests ETH holders are increasingly accessing liquidity through borrowing rather than selling, particularly during periods of price volatility.

Bitcoin remains the dominant collateral asset, accounting for 56% of total collateral, reinforcing its role as the primary base asset in crypto credit markets.

Borrowing Remains Pro-Cyclical, Not Expansionary

CryptoQuant emphasizes that borrowing demand is inherently pro-cyclical. Leverage typically expands during bullish conditions when investor confidence is high, collateral values are rising, and users borrow stablecoins to increase exposure to crypto assets.

The current rebound does not yet meet those conditions. Borrowing is increasing from depressed levels, but without the speed or scale that typically characterizes speculative cycles.

Conclusion

Crypto borrowing activity is stabilizing and slowly recovering after the December 2025 lows, but the data points to caution rather than conviction. Both DeFi and CeFi platforms show incremental improvement, while ETH’s growing role as collateral highlights a preference for liquidity access without forced selling.

For now, leverage is rebuilding defensively. A transition to a full expansion phase would likely require stronger market confidence, higher collateral valuations, and a more aggressive pickup in borrowing demand than what is currently observed.

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