DeFi borrowers shrug off $13B exit as 38% leverage ratio hits 2021 levels 💸

Binance reported that the on-chain leverage ratio across decentralized finance has climbed to roughly 38%, a level last seen during the speculative peaks of 2021. The rise does not reflect fresh borrowing enthusiasm but rather a shrinking denominator, as Total Value Locked across DeFi protocols has compressed amid declining asset prices and capital withdrawals.

Investors pulled approximately $13 billion from DeFi protocols following major exploits and hacks in April, deepening the TVL contraction. Under typical conditions, such outflows would coincide with deleveraging, as borrowers repay loans and close risky positions. Binance's report, however, found that "deleveraging has yet to materialize," meaning borrowing levels have not declined in proportion to the TVL drop.

Many participants continue to hold borrowed positions despite the weaker market backdrop. DeFi loans are generally overcollateralized, which has helped borrowers avoid liquidation as prices fell, while others maintain positions in anticipation of a rebound or because arbitrage and yield strategies remain profitable.

The combination of high leverage and shrinking collateral pools leaves the ecosystem exposed to forced selling. A further decline in asset prices could trigger liquidation cascades and elevated volatility. The current situation mirrors an eight-month deleveraging stretch in Bitcoin [$BTC], as previously reported by AMBCrypto, even as DeFi borrowers have so far resisted the same impulse to de-risk.