Bitcoin Lending Resurgence: Crypto Collateral Trends for Financial Advisors 2024

In the latest "Crypto for Advisors" analysis, Gregory Mall, CIO at Lionsoul Global, examines the recovery of Bitcoin-backed lending across decentralized and centralized financial platforms. The institutional loan market shows significant revival with improved risk management protocols following the 2022 downturn. The crypto lending ecosystem has evolved substantially since its early days. Bitcoin lending initially emerged in 2013, with institutional players like Genesis and BlockFi entering during the 2016-2017 ICO boom. The 2020-2021 DeFi explosion further accelerated growth, though competitive pressures led to weakened underwriting standards. The 2022 market crisis triggered by TerraUSD and Three Arrows Capital collapses exposed fundamental vulnerabilities. Major CeFi lenders including Celsius, Voyager, and BlockFi faced bankruptcy, erasing billions in customer assets. Post-crisis analysis revealed critical failures in collateral management and risk assessment. Current market dynamics show a notable divergence: DeFi lending has recovered strongly, approaching previous TVL peaks due to transparent on-chain operations, while CeFi volumes remain around 40% of 2021 highs despite improved risk controls. Institutional borrowers continue favoring regulated CeFi platforms for compliance reasons, while DeFi attracts those prioritizing transparency and composability. Market experts predict parallel growth for both sectors, with CeFi offering regulatory clarity and DeFi providing innovative lending solutions. The resurgence demonstrates crypto's enduring potential as collateral, particularly BTC's unique liquidity advantages for 24/7 trading and tax-efficient lending structures.