Bitcoin lenders bets, tighter controls and clearer risk management can rebuild trust in industries that are still plagued by Celsius and Blockfi crashes.
After the turn, the main Bitcoin lender of the previous cycle exploded User deposits to insufficient loans. When Bitcoin (BTC) Prices fell, liquidity was dry, and billions of dollars of customer funds were frozen or gone.
But these implosions do not prove that crypto-backed loans are destined to be designed. Failure is largely the result of poor risk management rather than the model itself. Alice Liu, head of research at CoinMarketCap, said some platforms are now taking the right steps, such as over-externalization, while implementing stricter liquidation thresholds.
“Better transparency and third-party custody can also help reduce adversary risk than ingesting opacity models like Celsius,” she told Cointelegraph.
But, even now some terms promise No re-dominated And the lower loan value (LTV) ratio, a sudden price drop in Bitcoin can still put the lending model under pressure.
Bitcoin loans are developing in Celsius
The decline of lenders such as Blockfi and Celsius reveals the flaws in the way early crypto lenders manage risks. Their model relies on re-domination, poor liquidity management and bets that are wrapped in opaque structures that give clients little insight into how to manage their assets.
Reuse is a practice of borrowing from traditional finance, where brokers reuse client collateral in their own transactions. This is a common and regulated strategy, but is often capped and disclosed to customers with strict reserve requirements.
Regular platforms and Blockfi and other platforms Reused customer depositscapital buffers or regulatory restrictions are not explicitly disclosed, putting users at risk of rivals and liquidity. The key difference is Celsius Actively sell retail investorswhile Blockfi has a stronger institutional footprint. Blockfi’s relationship with now-banked crypto exchange FTX and sister company Alameda Research proved to be Just like poisonous.
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According to Liu, the current cycle’s loan market consists of mature investors and fewer “retail Degens”. This means that funds locked for Bitcoin-consolidated loans are long-term holders, corporate treasury and institutional funds.
“Their motivations are now centered around liquidity acquisition, tax optimization or diversification, rather than generating agriculture,” Liu said. “This reduces the pressure to compete on products with better conditions; instead, users place safety and risk assessments at the forefront of product evaluation.”
Re-dominate many crypto users who are still worried about the burning of Celsius. Platform likes strike – Run by Jack Mallers, Bitcoin Mallers – Promises have never reused customer bitcoins, while those who did take steps to explain how the model works and how to reduce borrowing costs with greater transparency.
“Some players are still reusing BTC, which means they are reusing collateral from elsewhere,” Wojtek Pawlowski said.
“So, whether it’s healthy or risky, it depends on the actual structure and how transparent it is.”
Bitcoin-backed loans make a comeback
A few years ago, cryptocurrency companies were the biggest new star in cryptocurrency companies. Galaxy Research estimates its consolidated loan book reached $34.8 billion in the first quarter of 2022.
But in the second quarter of that year, the Terra Stablecoin crash triggered a series of bankruptcies across the industry. Major lenders such as Blockfi, Celsius and Voyager Digital were in a disaster.
The loan book size bottomed out at $6.4 billion, down 82% from its Glorious Age. Galaxy Research estimates that the Bitcoin lending model has gained traction again, with open CEFI borrowing recovering to $13.51 billion as of the end of the first quarter of 2025, an estimated quarter-quarter growth of 9.24%.
Today’s lending model employs clear guidance on improved risk controls such as lowering LTV ratios and respending. However, the core structural risk is that the entire model depends on volatile assets like Bitcoin.
The business models of lenders such as Celsius and Blockfi are already fragile, but when Bitcoin prices fall, their cracks begin to widen into mature crises.
Related: U.S. housing mortgage regulator considers Bitcoin amid housing crisis
Modern lenders have used over-externalization and stricter marginal enforcement to address many of these issues. However, even conservative LTVs can be quickly unbuttoned in a sharp decline.
“BTC remains volatile, and while the platform actively (monitored) LTV and (enforced) real-time margin calls, a 20% drop in price will still lead to large-scale liquidation. If the platform repackages collateral as a revenue strategy (respension, Defi tefi atrove offer, etc.), the risk rewards.”
A safer Bitcoin loan model is not bulletproof
Bitcoin’s volatility has stabilized compared to its early years, but it is still easy to swing every day.
In early 2025, Bitcoin often rose 5% per day due to global trade tensions, even falling to $77,000 in March, according to Coingecko.
“(Bitcoin-backed loans) are safer, but not bulletproof,” Sam Mudie, Savea’s co-founder and CEO, told Cointelegraph. “The lower leverage, public proof, and in some cases, the actual banking license is a real improvement.”
Even with a lower LTV ratio and a re-dominated semester table now ban, Mudie warns that crypto lenders are still using a single asset’s collateral pool whose value can drop by 5% overnight.
Bitcoin loans are unlocking new financial use cases. As a Cointelegraph Report On June 15, Bitcoinized loans allowed users to lightly press liquidity without selling shares, helping them avoid capital gains taxes and even enter the real estate market.
But Bitcoin purists remain vigilant. These use cases often involve traditional financial intermediaries and legal systems, introducing new layers of risk.
“Buying a home with Bitcoin is a great title. But,[Bitcoin]also knows that real estate transactions are known through many legacy systems, not just smart contracts,” Moody said.
Instead, Mudie envisions more crypto-local lending models: shared multi-symbol wallets, public chain visibility, hard limits on collateral reuse and automatic margin calls when prices drop. He added that the platform can further protect users by lending only up to 40% of the collateral value.
For now, Bitcoin-backed loans are experiencing a cautious resurgence due to tighter controls and stronger mastery that reduce the risk of the first wave. But even the safest models must remain modest before the root cause solves volatility.
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