The on-chain leverage ratio in decentralized finance has climbed to roughly 38%, a mark last seen in 2021, according to Binance Research. But this time the jump isn’t coming from a borrowing frenzy — it’s the result of total value locked (TVL) dropping sharply after hackers stole about $606 million in April.
Leverage Rises as TVL Shrinks
Binance Research’s data shows the leverage ratio increased because the denominator — TVL — shrank, not because more users were taking out loans. April’s security incidents triggered approximately $13 billion in TVL outflows, with one exploit alone costing Kelp DAO an estimated $292 million. The drop in locked assets pushed the ratio higher even though overall borrowing demand didn’t spike.
April’s Security Incidents
The month was brutal for DeFi. Hackers drained around $606 million from various protocols, and the Kelp DAO heist accounted for nearly half that sum. After the attacks, investors pulled money out fast, sending TVL tumbling. The outflows were so large they single-handedly drove the leverage ratio to levels not seen in four years — but for the wrong reasons.
No Deleveraging Yet
Despite the broader market pullback, meaningful deleveraging hasn’t happened. That means if prices weaken further, the system remains vulnerable to cascading liquidations. Borrowers haven’t paid down their debts or added collateral at the pace needed to reduce risk. Binance Research flagged this as a key concern: the market is still carrying leverage built up before the hacks, and the cushion has thinned.
Whether that deleveraging comes gently or in a rush depends on where prices go next. For now, the numbers are stacked in a way that hasn’t been seen since the last cycle — and not in a comforting way.
