The State of the Crypto Credit Ecosystem

The Crypto Credit Landscape
One area in crypto that consistently feels misunderstood by both insiders and new market observers alike is crypto credit.

This report provides an introduction to the state of crypto credit markets, including a look at unique market structure characteristics that drive the supply and demand of crypto credit; and concludes with comments from various industry participants on the opportunities that remain within the broader crypto credit ecosystem.

The crypto market is still evolving in its quest to figure out how to rationally price and sell counterparty risk, but to be fair, the pricing and selling of risk is what ultimately helps drive the net benefit of price discovery, deeper liquidity, and ultimately maturation of a market. All good things, to be sure.

To date, crypto credit extension has predominately been provided via secured lending; requiring borrowers to post cryptoassets as collateral — typically significantly overcollateralized to protect against higher levels of asset volatility — in exchange for either crypto or dollar-denominated stablecoins. Loans can be originated centrally with a traditional credit desk or prime broker (Centralized Finance - CeFi) or through a decentralized non-custodial lending protocol (Decentralized Finance - DeFi).