DeFi has come back in a big way. Total value locked (TVL), which measures how much money is placed inside decentralized apps, has now reached $160 billion.
This is the highest level since May 2022, and almost five times higher than the lowest levels of the cycle.
Ethereum and Solana led the way. Ethereum’s TVL rose 50% in Q3, moving from $54 billion in July to nearly $97 billion today. Solana also grew about 30%, from $10 billion to $13 billion.
Lending protocols like Aave, liquid staking giant Lido, and restaking platform EigenLayer have been the main winners.
But there is a bigger question: is this new liquidity building strength for crypto rallies, or is it making them weaker and more fragile?
Borrowing and Lending Are Clear DeFi TVL Drivers
Much of the growth in DeFi TVL comes from borrowing and lending. In simple words, people are putting stablecoins into platforms like Aave to earn interest, while others are borrowing those coins to trade with leverage.
The incentive to lend is high because yields are attractive compared to just holding coins.
The incentive to borrow is also high because traders want more capital to use in futures or other leveraged products.
This creates a loop. The more collateral values go up, the more people can borrow. The more they borrow, the more they trade, and this adds to volatility.
So while the TVL number looks like a sign of strength, much of it is not “resting capital.” Instead, it is money that keeps moving in and out of leveraged trades.
Futures Volumes in Line With DeFi’s Growth
Binance futures just hit a new record. In August, trading volume reached $2.62 trillion. This was the highest monthly number of 2025 so far, beating July’s $2.55 trillion.
This shows that both retail traders and institutions are returning to the futures market.
Open interest, which measures how many positions are still active, also stayed high, meaning this was not only liquidations. It was new bets being placed.
Even altcoins joined the rush. On Binance, LUNC futures alone saw volumes above $15 million in a single session.
This suggests that even long-forgotten tokens are seeing new speculative activity once leverage becomes available.
The rise in Binance futures lines up with what is happening in DeFi. Derivatives TVL on DeFi platforms has also hit a new record of $6.3 billion, according to DeFiLlama.
This means traders are not only using centralized platforms like Binance, but are also betting with leverage on-chain.
The Loop Effect Involving Risk and Growth
When prices rise, collateral values also rise. That allows more borrowing. The borrowed funds often flow into futures markets, both on Binance and inside DeFi. This creates even more activity and pushes prices higher.
But the same loop can work in reverse. If Bitcoin or Ethereum prices fall, collateral values shrink. That forces borrowers to repay or liquidate. Long liquidations then push prices down further, creating a chain reaction.
This is why some analysts warn that while DeFi’s growth looks like a sign of health, it could make the next correction sharper. With more money tied up in leveraged bets, downturns hit harder.
DeFi’s 5x growth to $160 billion is one of the strongest signs that capital has returned to crypto. It shows confidence in platforms like Ethereum, Solana, Aave, Lido, and EigenLayer.
At the same time, Binance’s $2.62 trillion futures volume in August proves that much of this capital is being used for speculation, not just long-term holding.
Even DeFi derivatives have set records, with $6.3 billion locked. Together, these trends show that liquidity is not just fueling crypto rallies.
It may also be setting them up for faster falls. If markets hold, the loop can keep working upward. But if markets turn, the leverage can make the drop much steeper than before.
In short, DeFi is helping crypto grow again, but it may also be making it more fragile.